0001193125-12-203555.txt : 20120502
0001193125-12-203555.hdr.sgml : 20120502
20120502123228
ACCESSION NUMBER: 0001193125-12-203555
CONFORMED SUBMISSION TYPE: 424B3
PUBLIC DOCUMENT COUNT: 1
FILED AS OF DATE: 20120502
DATE AS OF CHANGE: 20120502
FILER:
COMPANY DATA:
COMPANY CONFORMED NAME: PRUDENTIAL ANNUITIES LIFE ASSURANCE CORP/CT
CENTRAL INDEX KEY: 0000881453
STANDARD INDUSTRIAL CLASSIFICATION: INSURANCE CARRIERS, NEC [6399]
IRS NUMBER: 061241288
STATE OF INCORPORATION: CT
FISCAL YEAR END: 1231
FILING VALUES:
FORM TYPE: 424B3
SEC ACT: 1933 Act
SEC FILE NUMBER: 333-177456
FILM NUMBER: 12803730
BUSINESS ADDRESS:
STREET 1: ONE CORPORATE DRIVE
CITY: SHELTON
STATE: CT
ZIP: 06484
BUSINESS PHONE: 2039261888
MAIL ADDRESS:
STREET 1: ONE CORPORATE DRIVE
CITY: SHELTON
STATE: CT
ZIP: 06484
FORMER COMPANY:
FORMER CONFORMED NAME: AMERICAN SKANDIA LIFE ASSURANCE CORP/CT
DATE OF NAME CHANGE: 19920929
424B3
1
d277191d424b3.txt
CHOICE 2000
PRUDENTIAL ANNUITIES LIFE ASSURANCE CORPORATION
A Prudential Financial Company
One Corporate Drive, Shelton, Connecticut 06484
ADVANCED SERIES
ADVISORS CHOICE(R) 2000
(MARKETED BY SOME FIRMS AS "ADVISORS SELECT 2000")
FLEXIBLE PREMIUM DEFERRED ANNUITY
PROSPECTUS: MAY 1, 2012
This Prospectus describes Advisors Choice(R) 2000, a flexible premium deferred
annuity (the "Annuity") issued by Prudential Annuities Life Assurance
Corporation ("Prudential Annuities"(R), "we", "our" or "us"). This Annuity is
no longer offered for new sales. The Annuity may be offered as an individual
annuity contract or as an interest in a group annuity. This Prospectus
describes the important features of the Annuity and what you should consider
before purchasing the Annuity. THE ANNUITY OR CERTAIN OF ITS INVESTMENT
OPTIONS AND/OR FEATURES MAY NOT BE AVAILABLE IN ALL STATES. For some of the
variations specific to Annuities approved for sale by the New York State
Insurance Department, see Appendix I. Certain terms are capitalized in this
Prospectus. Those terms are either defined in the Glossary of Terms or in the
context of the particular section.
Prudential Annuities offers several different annuities which your Financial
Professional may be authorized to offer to you. Each Annuity has different
features and benefits that may be appropriate for you based on your financial
situation, your age and how you intend to use the annuity. Firms through which
the Annuity is sold may not make available or may not recommend to their
customers certain of the optional features and investment options offered
generally under the Annuity. The different features and benefits include
variations in death benefit protection and the ability to access your
Annuity's Account Value and the charges that you will be subject to if you
choose to surrender the annuity, make withdrawals, or transfer all or a
portion of Account Value among available investment options. The fees and
charges you pay and compensation paid to your Financial Professional may also
be different between each annuity. Differences in compensation among different
annuity products could influence a Financial Professional's decision as to
which annuity to recommend to you.
THE SUB-ACCOUNTS
Each Sub-account of Prudential Annuities Life Assurance Corporation Variable
Account B, invests in an underlying mutual fund portfolio. Prudential
Annuities Life Assurance Corporation Variable Account B is a separate account
of Prudential Annuities, and is the investment vehicle in which your Purchase
Payments are held. Currently, portfolios of the following underlying mutual
funds are being offered: AIM Variable Insurance Funds (Invesco Variable
Insurance Funds), Advanced Series Trust, First Defined Portfolio Fund, LLC,
Nationwide Variable Insurance Trust, ProFunds VP, The Prudential Series Fund,
Security Global Investors, Franklin Templeton Variable Insurance Products
Trust and Wells Fargo Variable Trust. See the following page for a complete
list of Sub-accounts.
PLEASE READ THIS PROSPECTUS
PLEASE READ THIS PROSPECTUS AND THE CURRENT PROSPECTUS FOR THE UNDERLYING
MUTUAL FUNDS. KEEP THEM FOR FUTURE REFERENCE.
AVAILABLE INFORMATION
We have also filed a Statement of Additional Information that is available
from us, without charge, upon your request. The contents of the Statement of
Additional Information are described below - see Table of Contents. The
Statement of Additional Information is incorporated by reference into this
Prospectus. This Prospectus is part of the registration statement we filed
with the SEC regarding this offering. Additional information on us and this
offering is available in the registration statement and the exhibits thereto.
You may review and obtain copies of these materials at no cost to you, by
contacting us. These documents, as well as documents incorporated by
reference, may also be obtained through the SEC's Internet Website
(http://www.sec.gov) for this registration statement as well as for other
registrants that file electronically with the SEC. Please see the section of
this Prospectus entitled "How To Contact Us" for our Service Office address.
THIS ANNUITY IS NOT A DEPOSIT OR OBLIGATION OF, OR ISSUED, GUARANTEED OR
ENDORSED BY, ANY BANK, IS NOT INSURED OR GUARANTEED BY THE U.S. GOVERNMENT,
THE FEDERAL DEPOSIT INSURANCE CORPORATION (FDIC), THE FEDERAL RESERVE BOARD OR
ANY OTHER AGENCY. AN INVESTMENT IN THIS ANNUITY INVOLVES INVESTMENT RISKS,
INCLUDING POSSIBLE LOSS OF VALUE, EVEN WITH RESPECT TO AMOUNTS ALLOCATED TO
THE AST MONEY MARKET SUB-ACCOUNT.
--------------------------------------------------------------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE COMMISSION
OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF
THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
ADVANCED SERIES ADVISORS CHOICE(R) 2000 IS A SERVICE MARK OR REGISTERED
TRADEMARK OF THE PRUDENTIAL INSURANCE COMPANY OF AMERICA AND IS USED UNDER
LICENSE BY ITS AFFILIATES.
--------------------------------------------------------------------------------
FOR FURTHER INFORMATION CALL: 1-888-PRU-2888
Prospectus Dated: Statement of Additional
May 1, 2012 Information Dated:
CH2PROS May 1, 2012 CHOICE2000
PLEASE SEE OUR IRA, ROTH IRA AND FINANCIAL DISCLOSURE STATEMENTS ATTACHED TO
THE BACK COVER OF THIS PROSPECTUS.
INVESTMENT OPTIONS
Please note that you may not allocate Purchase Payments to the AST Investment
Grade Bond Portfolio or the target date bond portfolios (e.g., AST Bond
Portfolio 2022)
ADVANCED SERIES TRUST
AST Academic Strategies Asset Allocation
AST Advanced Strategies
AST Balanced Asset Allocation
AST BlackRock Global Strategies
AST BlackRock Value
AST Bond Portfolio 2015
AST Bond Portfolio 2016
AST Bond Portfolio 2017
AST Bond Portfolio 2018
AST Bond Portfolio 2019
AST Bond Portfolio 2020
AST Bond Portfolio 2021
AST Bond Portfolio 2022
AST Bond Portfolio 2023
AST Capital Growth Asset Allocation
AST CLS Moderate Asset Allocation
AST Cohen & Steers Realty
AST Federated Aggressive Growth
AST FI Pyramis(R) Asset Allocation
AST First Trust Balanced Target
AST First Trust Capital Appreciation Target
AST Franklin Templeton Founding Funds Allocation Fund
AST Global Real Estate
AST Goldman Sachs Concentrated Growth
AST Goldman Sachs Large-Cap Value
AST Goldman Sachs Mid-Cap Growth
AST Goldman Sachs Small-Cap Value
AST High Yield
AST Horizon Growth Asset Allocation
AST Horizon Moderate Asset Allocation
AST International Growth
AST International Value
AST Investment Grade Bond
AST Jennison Large-Cap Growth
AST Jennison Large-Cap Value
AST JPMorgan International Equity
AST JPMorgan Strategic Opportunities
AST Large-Cap Value
AST Lord Abbett Core-Fixed Income
AST Marsico Capital Growth
AST MFS Global Equity
AST MFS Growth
AST Mid-Cap Value
AST Money Market
AST Neuberger Berman Core Bond
AST Neuberger Berman Mid-Cap Growth
AST Neuberger Berman/LSV Mid-Cap Value
AST New Discovery Asset Allocation
AST Parametric Emerging Markets Equity
AST PIMCO Limited Maturity Bond
AST PIMCO Total Return Bond
AST Preservation Asset Allocation
AST Prudential Core Bond
AST QMA US Equity Alpha
AST Quantitative Modeling
AST Schroders Global Tactical
AST Schroders Multi-Asset World Strategies
AST Small-Cap Growth
AST Small-Cap Value
AST T. Rowe Price Asset Allocation
AST T. Rowe Price Equity Income
AST T. Rowe Price Global Bond
AST T. Rowe Price Large-Cap Growth
AST T. Rowe Price Natural Resources
AST Wellington Management Hedged Equity
AST Western Asset Core Plus Bond
AIM VARIABLE INSURANCE FUNDS
(Invesco Variable Insurance Funds)
Invesco Van Kampen V.I. Mid-Cap Growth Fund -- Series I shares
Invesco V.I. Diversified Dividend Fund -- Series I shares
Invesco V.I. Global Health Care Fund -- Series I shares
Invesco V.I. Technology Fund -- Series I shares
FIRST DEFINED PORTFOLIO FUND, LLC
First Trust Target Focus Four
Global Dividend Target 15
NASDAQ(R) Target 15
S&P(R) Target 24
Target Managed VIP
The Dow(R) DART 10
The Dow(R) Target Dividend
*Value Line(R) Target 25
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST
**Franklin Templeton VIP Founding Funds Allocation Fund
NATIONWIDE VARIABLE INSURANCE TRUST
NVIT Developing Markets Fund
PROFUNDS VP
Access VP High Yield
Asia 30
Banks
Basic Materials
Bear
Biotechnology
Bull
Consumer Goods
Consumer Services
Europe 30
Financials
Health Care
Industrials
Internet
Japan
Large-Cap Growth
Large-Cap Value
Mid-Cap Growth
Mid-Cap Value
Oil & Gas
NASDAQ-100
Pharmaceuticals
Precious Metals
Real Estate
Rising Rates Opportunity
Semiconductor
Short Mid-Cap
Short NASDAQ-100
Short Small-Cap
Small-Cap Growth
Small-Cap Value
Technology
Telecommunications
U.S. Government Plus
UltraBull
UltraMid-Cap
UltraNASDAQ-100
UltraSmall-Cap
Utilities
THE PRUDENTIAL SERIES FUND
*SP International Growth
GUGGENHEIM INVESTMENTS
NASDAQ-100(R)
Nova
Inverse S&P 500 Strategy
WELLS FARGO VARIABLE TRUST
Wells Fargo Advantage VT International Equity
Wells Fargo Advantage VT Intrinsic Value
Wells Fargo Advantage VT Omega Growth
Wells Fargo Advantage VT Small-Cap Growth
* no longer offered.
** No longer offered for new sales. See description regarding the Fund in
the "Investment Objectives/Policies" table under "Investment Options."
CONTENTS
GLOSSARY OF TERMS...................................................................... 1
SUMMARY OF CONTRACT FEES AND CHARGES................................................... 5
EXPENSE EXAMPLES....................................................................... 16
SUMMARY................................................................................ 17
INVESTMENT OPTIONS..................................................................... 20
WHAT ARE THE INVESTMENT OBJECTIVES AND POLICIES OF THE PORTFOLIOS?.................... 20
WHAT ARE THE FIXED ALLOCATIONS?....................................................... 48
FEES AND CHARGES....................................................................... 49
WHAT ARE THE CONTRACT FEES AND CHARGES?............................................... 49
WHAT CHARGES APPLY TO THE FIXED ALLOCATIONS?.......................................... 50
WHAT CHARGES APPLY IF I CHOOSE AN ANNUITY PAYMENT OPTION?............................. 50
EXCEPTIONS/REDUCTIONS TO FEES AND CHARGES............................................. 50
PURCHASING YOUR ANNUITY................................................................ 51
WHAT ARE OUR REQUIREMENTS FOR PURCHASING THE ANNUITY?................................. 51
MANAGING YOUR ANNUITY.................................................................. 54
MAY I CHANGE THE OWNER, ANNUITANT AND BENEFICIARY DESIGNATIONS?....................... 54
MAY I RETURN MY ANNUITY IF I CHANGE MY MIND?.......................................... 55
MAY I MAKE ADDITIONAL PURCHASE PAYMENTS?.............................................. 55
MAY I MAKE SCHEDULED PAYMENTS DIRECTLY FROM MY BANK ACCOUNT?.......................... 55
MAY I MAKE PURCHASE PAYMENTS THROUGH A SALARY REDUCTION PROGRAM?...................... 55
MANAGING YOUR ACCOUNT VALUE............................................................ 56
HOW AND WHEN ARE PURCHASE PAYMENTS INVESTED?.......................................... 56
ARE THERE RESTRICTIONS OR CHARGES ON TRANSFERS BETWEEN INVESTMENT OPTIONS?............ 56
DO YOU OFFER DOLLAR COST AVERAGING?................................................... 57
HOW DO THE FIXED ALLOCATIONS WORK?.................................................... 60
HOW DO YOU DETERMINE RATES FOR FIXED ALLOCATIONS?..................................... 60
WHAT HAPPENS WHEN MY GUARANTEE PERIOD MATURES?........................................ 61
DO YOU OFFER ANY AUTOMATIC REBALANCING PROGRAMS?...................................... 61
ARE ANY ASSET ALLOCATION PROGRAMS AVAILABLE?.......................................... 61
WHAT IS THE BALANCED INVESTMENT PROGRAM?.............................................. 61
MAY I GIVE MY FINANCIAL PROFESSIONAL PERMISSION TO FORWARD TRANSACTION INSTRUCTIONS?.. 62
MAY I AUTHORIZE MY THIRD PARTY INVESTMENT ADVISOR TO MANAGE MY ACCOUNT?............... 62
HOW DOES THE MARKET VALUE ADJUSTMENT WORK?............................................ 63
ACCESS TO ACCOUNT VALUE................................................................ 64
WHAT TYPES OF DISTRIBUTIONS ARE AVAILABLE TO ME?...................................... 64
ARE THERE TAX IMPLICATIONS FOR DISTRIBUTIONS?......................................... 64
CAN I WITHDRAW A PORTION OF MY ANNUITY?............................................... 64
CAN I MAKE PERIODIC WITHDRAWALS FROM THE ANNUITY DURING THE ACCUMULATION PERIOD?...... 64
DO YOU OFFER A PROGRAM FOR WITHDRAWALS UNDER SECTION 72(t) OF THE INTERNAL REVENUE
CODE?............................................................................... 65
WHAT ARE REQUIRED MINIMUM DISTRIBUTIONS AND WHEN WOULD I NEED TO MAKE THEM?........... 65
CAN I SURRENDER MY ANNUITY FOR ITS VALUE?............................................. 65
WHAT TYPES OF ANNUITY OPTIONS ARE AVAILABLE?.......................................... 66
HOW AND WHEN DO I CHOOSE THE ANNUITY PAYMENT OPTION?.................................. 66
HOW ARE ANNUITY PAYMENTS CALCULATED?.................................................. 67
LIVING BENEFITS........................................................................ 68
DO YOU OFFER BENEFITS DESIGNED TO PROVIDE INVESTMENT PROTECTION FOR OWNERS WHILE THEY
ARE ALIVE?.......................................................................... 68
GUARANTEED RETURN OPTION PLUS/SM/ (GRO PLUS)/SM/...................................... 70
GUARANTEED RETURN OPTION (GRO)(R)..................................................... 74
GUARANTEED RETURN OPTION PLUS 2008/SM/ (GRO PLUS 2008)................................ 77
GUARANTEED RETURN OPTION PLUS/SM/ II (GRO Plus/SM/ II)................................ 82
(i)
HIGHEST DAILY GUARANTEED RETURN OPTION/SM/ (HD GRO)/SM/.................................... 87
HIGHEST DAILY/SM/ GUARANTEED RETURN OPTION/SM/ II (HD GRO/SM/ II).......................... 92
GUARANTEED MINIMUM WITHDRAWAL BENEFIT (GMWB)............................................... 96
GUARANTEED MINIMUM INCOME BENEFIT (GMIB)................................................... 99
LIFETIME FIVE/SM/ INCOME BENEFIT (LIFETIME FIVE)/SM/....................................... 103
SPOUSAL LIFETIME FIVE/SM/ INCOME BENEFIT (SPOUSAL LIFETIME FIVE)/SM/....................... 108
HIGHEST DAILY LIFETIME FIVE/SM/ INCOME BENEFIT (HIGHEST DAILY LIFETIME FIVE)/SM/........... 111
HIGHEST DAILY LIFETIME SEVEN/SM/ INCOME BENEFIT (HIGHEST DAILY LIFETIME SEVEN)/SM/......... 120
SPOUSAL HIGHEST DAILY LIFETIME SEVEN/SM/ INCOME BENEFIT (SPOUSAL HIGHEST DAILY LIFETIME
SEVEN)/SM/............................................................................... 131
HIGHEST DAILY LIFETIME 7 PLUS/SM/ INCOME BENEFIT (HIGHEST DAILY LIFETIME 7 PLUS)/SM/....... 141
SPOUSAL HIGHEST DAILY LIFETIME 7 PLUS/SM/ INCOME BENEFIT (SPOUSAL HIGHEST DAILY LIFETIME 7
PLUS)/SM/................................................................................ 155
HIGHEST DAILY LIFETIME/SM/ 6 PLUS INCOME BENEFIT (HD LIFETIME 6 PLUS)...................... 164
SPOUSAL HIGHEST DAILY LIFETIME/SM/ 6 PLUS INCOME BENEFIT (SHD LIFETIME 6 PLUS)............. 177
DEATH BENEFIT............................................................................... 186
WHAT TRIGGERS THE PAYMENT OF A DEATH BENEFIT?.............................................. 186
BASIC DEATH BENEFIT........................................................................ 186
OPTIONAL DEATH BENEFITS.................................................................... 186
PAYMENT OF DEATH BENEFITS.................................................................. 191
VALUING YOUR INVESTMENT..................................................................... 194
HOW IS MY ACCOUNT VALUE DETERMINED?........................................................ 194
WHAT IS THE SURRENDER VALUE OF MY ANNUITY?................................................. 194
HOW AND WHEN DO YOU VALUE THE SUB-ACCOUNTS?................................................ 194
HOW DO YOU VALUE FIXED ALLOCATIONS?........................................................ 194
WHEN DO YOU PROCESS AND VALUE TRANSACTIONS?................................................ 194
WHAT HAPPENS TO MY UNITS WHEN THERE IS A CHANGE IN DAILY ASSET-BASED CHARGES?.............. 196
TAX CONSIDERATIONS.......................................................................... 197
GENERAL INFORMATION......................................................................... 206
HOW WILL I RECEIVE STATEMENTS AND REPORTS?................................................. 206
WHO IS PRUDENTIAL ANNUITIES?............................................................... 206
WHAT ARE SEPARATE ACCOUNTS?................................................................ 207
WHAT IS THE LEGAL STRUCTURE OF THE UNDERLYING FUNDS?....................................... 208
WHO DISTRIBUTES ANNUITIES OFFERED BY PRUDENTIAL ANNUITIES?................................. 209
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE............................................ 211
FINANCIAL STATEMENTS....................................................................... 211
HOW TO CONTACT US.......................................................................... 211
INDEMNIFICATION............................................................................ 212
LEGAL PROCEEDINGS.......................................................................... 212
CONTENTS OF THE STATEMENT OF ADDITIONAL INFORMATION........................................ 213
APPENDIX A - CONDENSED FINANCIAL INFORMATION ABOUT SEPARATE ACCOUNT B....................... A-1
APPENDIX B - CALCULATION OF OPTIONAL DEATH BENEFITS......................................... B-1
APPENDIX C-1 - ADVISOR'S CHOICE PRIOR CONTRACT.............................................. C-1
APPENDIX C-2 - ADVISOR'S CHOICE PRIOR CONTRACT.............................................. C-3
APPENDIX D - PERFORMANCE ADVANTAGE.......................................................... D-1
APPENDIX E - PLUS40 OPTIONAL LIFE INSURANCE RIDER........................................... E-1
APPENDIX F - DESCRIPTION AND CALCULATION OF PREVIOUSLY OFFERED OPTIONAL
DEATH BENEFITS............................................................................ F-1
APPENDIX G - ADDITIONAL INFORMATION ON ASSET ALLOCATION PROGRAMS............................ G-1
APPENDIX H - FORMULA UNDER HIGHEST DAILY LIFETIME FIVE BENEFIT.............................. H-1
APPENDIX I - ANNUITIES APPROVED FOR SALE BY THE NEW YORK STATE INSURANCE DEPARTMENT......... I-1
APPENDIX J - FORMULA UNDER GRO PLUS 2008.................................................... J-1
(ii)
APPENDIX K - FORMULA UNDER HIGHEST DAILY LIFETIME SEVEN AND SPOUSAL HIGHEST DAILY
LIFETIME SEVEN INCOME BENEFIT..................................................... K-1
APPENDIX L - FORMULA UNDER HIGHEST DAILY LIFETIME 7 PLUS INCOME BENEFIT AND SPOUSAL
HIGHEST DAILY LIFETIME 7 PLUS INCOME BENEFIT...................................... L-1
APPENDIX M - SPECIAL CONTRACT PROVISIONS FOR ANNUITIES ISSUED IN CERTAIN STATES..... M-1
APPENDIX N - FORMULA UNDER THE GUARANTEED RETURN OPTION PLUS BENEFIT................ N-1
APPENDIX O - FORMULA UNDER THE GUARANTEED RETURN OPTION BENEFIT..................... O-1
APPENDIX P - FORMULA FOR HIGHEST DAILY LIFETIME 6 PLUS AND SPOUSAL HIGHEST DAILY
LIFETIME 6 PLUS INCOME BENEFIT.................................................... P-1
APPENDIX Q - FORMULA FOR GRO PLUS II BENEFIT........................................ Q-1
APPENDIX R - FORMULA UNDER HIGHEST DAILY GRO........................................ R-1
APPENDIX S - FORMULA UNDER HIGHEST DAILY GRO II..................................... S-1
(iii)
GLOSSARY OF TERMS
Many terms used within this Prospectus are described within the text where
they appear. The description of those terms are not repeated in this Glossary
of Terms.
ACCOUNT VALUE: The value of each allocation to a Sub-account (also referred to
as "variable investment option") plus any Fixed Allocation prior to the
Annuity Date, increased by any earnings, and/or less any losses, distributions
and charges. Other than on the Annuity anniversary, the Account Value is
calculated before we assess any fee that is deducted from the Annuity annually
in arrears. The Account Value is determined separately for each Sub-account
and for each Fixed Allocation, and then totaled to determine the Account Value
for your entire Annuity. The Account Value of each MVA Fixed Allocation on any
day other than its Maturity Date may be calculated using a market value
adjustment. With respect to Annuities with a Highest Daily Lifetime Five
Income Benefit election, Account Value includes the value of any allocation to
the Benefit Fixed Rate Account.
ADVISOR: A person or entity which:
. is registered under the Investment Advisers Act of 1940, as amended, or,
where applicable, under equivalent state law or regulation regarding the
registration of investment advisors; or
. may provide investment advisory services but is exempt from such
registration.
ANNUITIZATION: The application of Account Value to one of the available
annuity options for the Owner to begin receiving periodic payments for life
(or joint lives), for a guaranteed minimum number of payments or for life with
a guaranteed minimum number of payments.
ANNUITY DATE: The date you choose for annuity payments to commence. Unless we
agree otherwise, for Annuities issued on or after November 20, 2006, the
Annuity Date must be no later than the first day of the calendar month
coinciding with or next following the later of: (a) the oldest Owner's or
Annuitant's 95/th/ birthday, (90/th/ birthday in New York) whichever occurs
first, and (b) the fifth anniversary of the Issue Date. With respect to
Annuities issued prior to November 20, 2006, please see the section of this
Prospectus entitled "How and When Do I Choose the Annuity Payment Option?".
ANNUITY YEAR: A 12-month period commencing on the Issue Date of the Annuity
and each successive 12-month period thereafter.
BENEFICIARY ANNUITY: If you are a beneficiary of an annuity that was owned by
a decedent, subject to the requirements discussed in this Prospectus. You may
transfer the proceeds of the decedent's annuity into the Annuity described in
this prospectus and continue receiving the distributions that are required by
the tax laws. This transfer option is only available for purchase of an IRA,
Roth IRA, or a non-qualified annuity.
BENEFIT FIXED RATE ACCOUNT: A fixed investment option that is used only if you
have elected the optional Highest Daily Lifetime Five Income Benefit. Amounts
allocated to the Benefit Fixed Rate Account earn a fixed rate of interest, and
are held within our general account. You may not allocate Purchase Payments to
the Benefit Fixed Rate Account. Rather, Account Value is transferred to and
from the Benefit Fixed Rate Account only under the pre-determined mathematical
formula of the Highest Daily Lifetime Five Income Benefit.
CODE: The Internal Revenue Code of 1986, as amended from time to time.
COMBINATION 5% ROLL-UP AND HAV DEATH BENEFIT: We offer an optional Death
Benefit that, for an additional cost, provides an enhanced level of protection
for your beneficiary(ies) by providing the greater of the Highest Anniversary
Value Death Benefit and a 5% annual increase on Purchase Payments adjusted for
withdrawals.
DCA FIXED RATE OPTION: An investment option that offers a fixed rate of
interest for a specified period during the accumulation period. The DCA Fixed
Rate Option is used only with our 6 or 12 Month Dollar Cost Averaging Program
("6 or 12 Month DCA Program"), under which the Purchase Payments that you have
allocated to that DCA Fixed Rate Option are transferred to the designated
Sub-accounts over a 6 month or 12 month period. Withdrawals or transfers from
the DCA Fixed Rate Option are not subject to any Market Value Adjustment. We
no longer offer our 6 or 12 Month DCA Program.
ENHANCED BENEFICIARY PROTECTION DEATH BENEFIT: An optional Death Benefit that,
for an additional cost, provides an enhanced level of protection for your
beneficiary(ies) by providing amounts in addition to the basic Death Benefit
that can be used to offset federal and state taxes payable on any taxable
gains in your Annuity at the time of your death. We no longer offer the
Enhanced Protection Death Benefit.
FIXED ALLOCATION: An investment option that offers a fixed rate of interest
for a specified Guarantee Period during the accumulation period. Certain Fixed
Allocations are subject to a market value adjustment if you withdraw Account
Value prior to the Fixed Allocations Maturity (MVA Fixed Allocation). We also
offer DCA Fixed Rate Options that are be used with our 6 or 12
1
Month Dollar Cost Averaging Program ("6 or 12 Month DCA Program"), and are not
subject to any market value adjustment. You may participate in a dollar cost
averaging program outside of the 6 or 12 Month DCA Program, where the source
of the funds to be transferred is a Fixed Allocation. We no longer offer our 6
or 12 Month DCA Program.
FREE LOOK: Under state insurance laws, you have the right, during a limited
period of time, to examine your Annuity and decide if you want to keep it or
cancel it. This right is referred to as your "free look" right. The length of
this time period depends on the law of your state, and may vary depending on
whether your purchase is a replacement or not.
GOOD ORDER: An instruction received by us, utilizing such forms, signatures,
and dating as we require, which is sufficiently complete and clear that we do
not need to exercise any discretion to follow such instructions. In your
Annuity contract, we use the term "In Writing" to refer to this general
requirement.
GUARANTEE PERIOD: A period of time during the accumulation period where we
credit a fixed rate of interest on a Fixed Allocation.
GUARANTEED MINIMUM INCOME BENEFIT (GMIB): An optional benefit that, for an
additional cost, after a seven-year waiting period, guarantees your ability to
begin receiving income from your Annuity in the form of annuity payments based
on your total Purchase Payments and an annual increase of 5% on such Purchase
Payments adjusted for withdrawals (called the "Protected Income Value"),
regardless of the impact of market performance on your Account Value. We no
longer offer GMIB.
GUARANTEED MINIMUM WITHDRAWAL BENEFIT (GMWB): An optional benefit that, for an
additional cost, guarantees your ability to withdraw amounts over time equal
to an initial principal value, regardless of the impact of market performance
on your Account Value. We no longer offer GMWB.
GUARANTEED RETURN OPTION PLUS/SM/ (GRO PLUS/SM/)/GUARANTEED RETURN OPTION PLUS
2008/SM/ (GRO PLUS 2008)/GUARANTEED RETURN OPTION (GRO)(R)/HIGHEST DAILY
GUARANTEED RETURN OPTION (HIGHEST DAILY GRO)/SM//GUARANTEED RETURN OPTION/SM/
PLUS II (GRO PLUS II)/SM//HIGHEST DAILY/SM/ GUARANTEED RETURN OPTION/SM/ II
(HD GRO II). Each of GRO Plus, GRO Plus 2008, GRO, Highest Daily GRO, GRO Plus
II, and HD GRO II is a separate optional benefit that, for an additional cost,
guarantees a minimum Account Value at one or more future dates and that
requires your participation in a program that may transfer your Account Value
according to a predetermined mathematical formula. Each benefit has different
features, so please consult the pertinent benefit description in the section
of the prospectus entitled "Living Benefits". Certain of these benefits are no
longer available for election.
HIGHEST ANNIVERSARY VALUE DEATH BENEFIT ("HAV"): An optional Death Benefit
that, for an additional cost, provides an enhanced level of protection for
your beneficiary(ies) by providing a death benefit equal to the greater of the
basic Death Benefit and the Highest Anniversary Value, less proportional
withdrawals.
HIGHEST DAILY LIFETIME FIVE/SM/ INCOME BENEFIT: An optional benefit that, for
an additional cost, guarantees your ability to withdraw amounts equal to a
percentage of a guaranteed benefit base called the Total Protected Withdrawal
Value. Subject to our rules regarding the timing and amount of withdrawals, we
guarantee these withdrawal amounts, regardless of the impact of market
performance on your Account Value. We no longer offer Highest Daily Lifetime
Five.
HIGHEST DAILY LIFETIME SEVEN/SM/ INCOME BENEFIT: An optional benefit that is
available for an additional charge. The benefit guarantees your ability to
withdraw amounts equal to a percentage of a guaranteed benefit base called the
Protected Withdrawal Value. Subject to our rules regarding the timing and
amount of withdrawals, we guarantee these withdrawal amounts, regardless of
the impact of market performance on your Account Value. Highest Daily Lifetime
Seven is the same class of optional benefit as our Highest Daily Lifetime Five
Income Benefit, but differs (among other things) with respect to how the
Protected Withdrawal Value is calculated and how the lifetime withdrawals are
calculated. We no longer offer Highest Daily Lifetime Seven.
HIGHEST DAILY LIFETIME 7 PLUS/SM/ INCOME BENEFIT: An optional benefit that is
available for an additional charge. The benefit guarantees your ability to
withdraw amounts equal to a percentage of a guaranteed benefit base called the
Protected Withdrawal Value. Subject to our rules regarding the timing and
amount of withdrawals, we guarantee these withdrawal amounts, regardless of
the impact of market performance on your Account Value. Highest Daily Lifetime
7 Plus is the same class of optional benefit as our Highest Daily Lifetime
Seven Income Benefit, but differs (among other things) with respect to how the
Protected Withdrawal Value is calculated and how the lifetime withdrawals are
calculated. We no longer offer Highest Daily Lifetime 7 Plus.
HIGHEST DAILY LIFETIME 6 PLUS INCOME BENEFIT: An optional benefit that is
available for an additional charge. The benefit guarantees your ability to
withdraw amounts equal to a percentage of a guaranteed benefit base called the
Protected Withdrawal Value. Subject to our rules regarding the timing and
amount of withdrawals, we guarantee these withdrawal amounts, regardless of
the impact of market performance on your Account Value. Highest Daily Lifetime
6 Plus is the same class of optional benefit as our Highest Daily Lifetime 7
Plus Income Benefit, but differs (among other things) with respect to how the
Protected Withdrawal Value is calculated and how the lifetime withdrawals are
calculated.
2
HIGHEST DAILY VALUE DEATH BENEFIT ("HDV"): An optional death benefit that, for
an additional cost, provides an enhanced level of protection for your
beneficiary(ies) by providing a death benefit equal to the greater of the
basic Death Benefit and the Highest Daily Value, less proportional
withdrawals. We no longer offer HDV.
INTERIM VALUE: The value of the MVA Fixed Allocations on any date other than
the Maturity Date. The Interim Value is equal to the initial value allocated
to the MVA Fixed Allocation plus all interest credited to the MVA Fixed
Allocation as of the date calculated, less any transfers or withdrawals from
the MVA Fixed Allocation. The interim value does not include the effect of
any MVA.
ISSUE DATE: The effective date of your Annuity.
KEY LIFE: Under the Beneficiary Continuation Option, or the Beneficiary
Annuity, the person whose life expectancy is used to determine payments.
LIFETIME FIVE/SM/ INCOME BENEFIT: An optional benefit that, for an additional
cost, guarantees your ability to withdraw an annual amount equal to a
percentage of an initial principal value called the Protected Withdrawal
Value. Subject to our rules regarding the timing and amount of withdrawals, we
guarantee these withdrawal amounts, regardless of the impact of market
performance on your Account Value. We no longer Lifetime Five.
MVA: A market value adjustment used in the determination of Account Value of a
MVA Fixed Allocation on any day more than 30 days prior to the Maturity Date
of such MVA Fixed Allocation.
OWNER: With an Annuity issued as an individual annuity contract, the Owner is
either an eligible entity or person named as having ownership rights in
relation to the Annuity. With an Annuity issued as a certificate under a group
annuity contract, the "Owner" refers to the person or entity who has the
rights and benefits designated as to the "Participant" in the certificate.
SERVICE OFFICE: The place to which all requests and payments regarding an
Annuity are to be sent. We may change the address of the Service Office at any
time. Please see the section of this prospectus entitled "How to Contact Us"
for the Service Office address.
SPOUSAL LIFETIME FIVE/SM/ INCOME BENEFIT: An optional benefit that, for an
additional cost, guarantees until the later death of two Designated Lives (as
defined in this Prospectus) the ability to withdraw an annual amount equal to
a percentage of an initial principal value called the Protected Withdrawal
Value. Subject to our rules regarding the timing and amount of withdrawals, we
guarantee these withdrawal amounts, regardless of the impact of market
performance on your Account Value. We no longer offer Spousal Lifetime Five.
SPOUSAL HIGHEST DAILY LIFETIME SEVEN/SM/ INCOME BENEFIT: An optional benefit
that, for an additional charge, guarantees your ability to withdraw amounts
equal to a percentage of a guaranteed benefit base called the Protected
Withdrawal Value. Subject to our rules regarding the timing and amount of
withdrawals, we guarantee these withdrawal amounts, regardless of the impact
of market performance on your Account Value. The benefit is the spousal
version of the Highest Daily Lifetime Seven Income Benefit and is the same
class of optional benefit as our Lifetime Five Income Benefit, but differs
(among other things) with respect to how the Protected Withdrawal Value is
calculated and to how the lifetime withdrawals are calculated. We no longer
offer Spousal Highest Daily Lifetime Seven.
SPOUSAL HIGHEST DAILY LIFETIME 7 PLUS/SM/ INCOME BENEFIT: An optional benefit
that, for an additional charge, guarantees your ability to withdraw amounts
equal to a percentage of a guaranteed benefit base called the Protected
Withdrawal Value. Subject to our rules regarding the timing and amount of
withdrawals, we guarantee these withdrawal amounts, regardless of the impact
of market performance on your Account Value. The benefit is the spousal
version of the Highest Daily Lifetime 7 Plus Income Benefit and is the same
class of optional benefit as our Spousal Highest Daily Lifetime Seven Income
Benefit, but differs (among other things) with respect to how the Protected
Withdrawal Value is calculated and to how the lifetime withdrawals are
calculated. We no longer offer Spousal Highest Lifetime 7 Plus.
SPOUSAL HIGHEST DAILY LIFETIME 6 PLUS INCOME BENEFIT: An optional benefit
that, for an additional charge, guarantees your ability to withdraw amounts
equal to a percentage of a guaranteed benefit base called the Protected
Withdrawal Value. Subject to our rules regarding the timing and amount of
withdrawals, we guarantee these withdrawal amounts, regardless of the impact
of market performance on your Account Value. The benefit is the spousal
version of the Highest Daily Lifetime 6 Plus Income Benefit and is the same
class of optional benefit as our Spousal Highest Daily Lifetime 7 Plus Income
Benefit, but differs (among other things) with respect to how the Protected
Withdrawal Value is calculated and to how the lifetime withdrawals are
calculated.
SUB-ACCOUNT: We issue your Annuity through our separate account. See "What is
the Separate Account?" under the General Information section. The separate
account invests in underlying mutual fund portfolios. From an accounting
perspective, we divide the separate account into a number of sections, each of
which corresponds to a particular underlying mutual fund portfolio. We refer
to each such section of our separate account as a "Sub-account".
3
SURRENDER VALUE: The value of your Annuity available upon surrender prior to
the Annuity Date. It equals the Account Value as of the date we price the
surrender minus the Annual Maintenance Fee, Tax Charge, the charge for any
optional benefits, and any additional amounts we applied to your Purchase
Payments that we may be entitled to recover under certain circumstances. There
is no Contingent Deferred Sales Charge upon surrender or partial withdrawal.
The surrender value may be calculated using a Market Value Adjustment with
respect to amounts in any MVA Fixed Allocation.
UNIT: A measure used to calculate your Account Value in a Sub-account during
the accumulation period.
VALUATION DAY: Every day the New York Stock Exchange is open for trading or
any other day the Securities and Exchange Commission requires mutual funds or
unit investment trusts to be valued.
4
SUMMARY OF CONTRACT FEES AND CHARGES
Below is a summary of the fees and charges for the Annuity. Some fees and
charges are assessed against your Annuity while others are assessed against
assets allocated to the Sub-accounts. The fees and charges that are assessed
against the Annuity include the Transfer Fee, Tax Charge and Annual
Maintenance Fee. The charges that are assessed against the Sub-accounts are
the Mortality and Expense Risk charge, the charge for Administration of the
Annuity, and the charge for certain optional benefits you elect. Certain
optional benefits deduct a charge from each Annuity based on a percentage of a
"protected value." Each underlying mutual fund portfolio assesses a fee for
investment management, other expenses and with some mutual funds, a 12b-1 fee.
The prospectus for each underlying mutual fund provides more detailed
information about the expenses for the underlying mutual funds.
The following table provides a summary of the fees and charges you will pay if
you surrender the Annuity or transfer Account Value among investment options.
These fees and charges are described in more detail within this Prospectus.
---------------------------------------------------------------------------------------------
TRANSACTION FEES AND CHARGES
(assessed against the Annuity)
---------------------------------------------------------------------------------------------
FEE/CHARGE AMOUNT DEDUCTED
---------------------------------------------------------------------------------------------
CONTINGENT DEFERRED SALES CHARGE There is no Contingent Deferred Sales Charge deducted upon
surrender or partial withdrawal.
---------------------------------------------------------------------------------------------
TRANSFER FEE /1/ $10.00
---------------------------------------------------------------------------------------------
TAX CHARGE (CURRENT) /2/ 0% to 3.5%
---------------------------------------------------------------------------------------------
1 Currently, we deduct the fee after the 20/th/ transfer each Annuity Year.
We guarantee that the number of charge free transfers per Annuity Year will
never be less than 12.
2 In some states a tax is payable, either when Purchase Payments are
received, upon surrender or when the Account Value is applied under an
annuity option. The tax charge is assessed as a percentage of purchase
payments, surrender value, or Account Value, as applicable. We reserve the
right to deduct the charge either at the time the tax is imposed, upon a
full surrender of the Annuity, or upon annuitization. See the subsection
"Tax Charge" under "Fees and Charges" in this prospectus.
The following table provides a summary of the periodic fees and charges you
will pay while you own your Annuity, excluding the underlying mutual fund
Portfolio's annual expenses. These fees and charges are described in more
detail within this prospectus.
-----------------------------------------------------------------------------------
PERIODIC FEES AND CHARGES
(assessed against the annuity)
-----------------------------------------------------------------------------------
FEE/CHARGE AMOUNT DEDUCTED
ANNUAL MAINTENANCE FEE /1/ Lesser of $35 or 2% of Account Value
-----------------------------------------
BENEFICIARY CONTINUATION OPTION ONLY Lesser of $30 or 2% of Account Value
-----------------------------------------------------------------------------------
ANNUAL FEES/CHARGES OF THE SUB-ACCOUNTS /2/
(assessed as a percentage of the average daily net assets of the Sub-accounts)
-----------------------------------------------------------------------------------
FEE/CHARGE AMOUNT DEDUCTED
MORTALITY & EXPENSE RISK CHARGE /3/ 0.50%
-----------------------------------------------------------------------------------
ADMINISTRATION CHARGE /3/ 0.15%
-----------------------------------------------------------------------------------
SETTLEMENT SERVICE CHARGE /4/ 1.40% (qualified); 1.00% (non-qualified)
-----------------------------------------------------------------------------------
TOTAL ANNUAL CHARGES OF THE SUB-ACCOUNTS 0.65%
(EXCLUDING SETTLEMENT SERVICE CHARGE)
-----------------------------------------------------------------------------------
1 Assessed annually on the Annuity's anniversary date or upon surrender. Only
applicable if Account Value is less than $50,000. Fee may differ in certain
States. For beneficiaries who elect the non-qualified Beneficiary
Continuation Option, the fee is only applicable if Account Value is less
than $25,000 at the time the fee is assessed.
2 These charges are deducted daily and apply to Sub-accounts only.
3 The combination of the Mortality and Expense Risk Charge and Administration
Charge is referred to as the "Insurance Charge" elsewhere in this
Prospectus. Prior to July 1, 1994, total annual expenses under the Annuity
were 1.90%, including an investment allocation service charge of 1.00% and
0.90% for what we now refer to as the "Insurance Charge." Effective July 1,
1994, we no longer deducted the investment allocation service charge; total
annual expenses were then 0.90%. Effective May 1, 1998, the Insurance
Charge was further reduced to 0.65%.
4 The Mortality & Expense Risk Charge and the Administration Charge do not
apply if you are a beneficiary under the Beneficiary Continuation Option.
The Settlement Service Charge applies only if your beneficiary elects the
Beneficiary Continuation Option.
5
The following table sets forth the charge for each optional benefit under the
Annuity. These fees would be in addition to the periodic fees and transaction
fees set forth in the tables above. The first column shows the charge for each
optional benefit on a maximum and current basis. Then, we show the total
expenses you would pay for an Annuity if you purchased the relevant optional
benefit. More specifically, we show the total charge for the optional benefit
plus the Total Annualized Insurance Fees/Charges applicable to the Annuity.
Where the charges cannot actually be totaled (because they are assessed
against different base values), we show both individual charges.
------------------------------------------------------------------------
YOUR OPTIONAL BENEFIT FEES AND
CHARGES /1/
------------------------------------------------------------------------
OPTIONAL BENEFIT OPTIONAL BENEFIT/ TOTAL ANNUAL
FEE CHARGE CHARGE /2/
------------------------------------------------------------------------
GRO PLUS II
CURRENT AND MAXIMUM CHARGE /4/ 0.60% 1.25%
(ASSESSED AGAINST SUB-ACCOUNT
NET ASSETS)
------------------------------------------------------------------------
HIGHEST DAILY GRO II
CURRENT AND MAXIMUM CHARGE /4/ 0.60% 1.25%
(ASSESSED AGAINST SUB-ACCOUNT
NET ASSETS)
------------------------------------------------------------------------
HIGHEST DAILY LIFETIME 6 PLUS (HD 6
PLUS)
MAXIMUM CHARGE /3/ 1.50% 0.65% + 1.50%
(ASSESSED AGAINST GREATER OF ACCOUNT
VALUE AND PWV)
CURRENT CHARGE 0.85% 0.65% + 0.85%
(ASSESSED AGAINST GREATER OF ACCOUNT
VALUE AND PWV)
------------------------------------------------------------------------
HIGHEST DAILY LIFETIME 6 PLUS WITH
LIFETIME INCOME ACCELERATOR (LIA)
MAXIMUM CHARGE /3/ 2.00% 0.65% + 2.00%
(ASSESSED AGAINST GREATER OF ACCOUNT
VALUE AND PWV)
CURRENT CHARGE 1.20% 0.65% + 1.20%
(ASSESSED AGAINST GREATER OF ACCOUNT
VALUE AND PWV)
------------------------------------------------------------------------
SPOUSAL HIGHEST DAILY LIFETIME 6 PLUS
MAXIMUM CHARGE /3/ 1.50% 0.65% + 1.50%
(ASSESSED AGAINST GREATER OF ACCOUNT
VALUE AND PWV)
CURRENT CHARGE 0.95% 0.65% + 0.95%
(ASSESSED AGAINST GREATER OF ACCOUNT
VALUE AND PWV)
------------------------------------------------------------------------
GUARANTEED RETURN OPTION/GRO PLUS
MAXIMUM CHARGE /3/ 0.75% 1.40%
(ASSESSED AGAINST SUB-ACCOUNT
NET ASSETS)
CURRENT CHARGE 0.25% 0.90%
(ASSESSED AGAINST SUB-ACCOUNT
NET ASSETS)
------------------------------------------------------------------------
GUARANTEED RETURN OPTION PLUS 2008
(GRO PLUS 2008)
MAXIMUM CHARGE /3/ 0.75% 1.40%
(ASSESSED AGAINST SUB-ACCOUNT
NET ASSETS)
CURRENT CHARGE 0.60% 1.25%
(ASSESSED AGAINST SUB-ACCOUNT
NET ASSETS)
(IF ELECTED ON OR AFTER MAY 1, 2009)
------------------------------------------------------------------------
HIGHEST DAILY GUARANTEED RETURN
OPTION (HD GRO)
CURRENT AND MAXIMUM CHARGE /4/ 0.60% 1.25%
(ASSESSED AGAINST SUB-ACCOUNT
NET ASSETS)
------------------------------------------------------------------------
6
-------------------------------------------------------------------------
YOUR OPTIONAL BENEFIT FEES AND
CHARGES /1/
-------------------------------------------------------------------------
OPTIONAL BENEFIT OPTIONAL BENEFIT/ TOTAL ANNUAL
FEE CHARGE CHARGE /2/
-------------------------------------------------------------------------
GUARANTEED MINIMUM WITHDRAWAL BENEFIT
(GMWB)
MAXIMUM CHARGE /3/ 1.00% 1.65%
(ASSESSED AGAINST SUB-ACCOUNT
NET ASSETS)
CURRENT CHARGE 0.35% 1.00%
(ASSESSED AGAINST SUB-ACCOUNT
NET ASSETS)
-------------------------------------------------------------------------
GUARANTEED MINIMUM INCOME BENEFIT
(GMIB)
MAXIMUM CHARGE/ 3/ 1.00% of PIV 0.65%
(ASSESSED AGAINST PIV) + 1.00% of PIV
CURRENT CHARGE 0.50% of PIV 0.65%
(ASSESSED AGAINST PIV) + 0.50% of PIV
-------------------------------------------------------------------------
LIFETIME FIVE INCOME BENEFIT
MAXIMUM CHARGE/ 3/ 1.50% 2.15%
(ASSESSED AGAINST SUB-ACCOUNT
NET ASSETS)
CURRENT CHARGE 0.60% 1.25%
(ASSESSED AGAINST SUB-ACCOUNT
NET ASSETS)
-------------------------------------------------------------------------
SPOUSAL LIFETIME FIVE INCOME BENEFIT
MAXIMUM CHARGE/ 3/ 1.50% 2.15%
(ASSESSED AGAINST SUB-ACCOUNT
NET ASSETS)
CURRENT CHARGE 0.75% 1.40%
(ASSESSED AGAINST SUB-ACCOUNT
NET ASSETS)
-------------------------------------------------------------------------
HIGHEST DAILY LIFETIME FIVE INCOME
BENEFIT
MAXIMUM CHARGE/ 3/ 1.50% 2.15%
(ASSESSED AGAINST SUB-ACCOUNT
NET ASSETS)
CURRENT CHARGE 0.60% 1.25%
(ASSESSED AGAINST SUB-ACCOUNT
NET ASSETS)
-------------------------------------------------------------------------
HIGHEST DAILY LIFETIME SEVEN INCOME
BENEFIT
MAXIMUM CHARGE/ 3/ 1.50% 0.65% + 1.50%
(ASSESSED AGAINST THE PWV)
CURRENT CHARGE 0.60% 0.65% + 0.60%
(ASSESSED AGAINST THE PWV)
-------------------------------------------------------------------------
HIGHEST DAILY LIFETIME SEVEN
W/BENEFICIARY INCOME OPTION
MAXIMUM CHARGE/ 3/ 2.00% 0.65% + 2.00%
(ASSESSED AGAINST THE PWV)
CURRENT CHARGE 0.95% 0.65% + 0.95%
(ASSESSED AGAINST THE PWV)
-------------------------------------------------------------------------
HIGHEST DAILY LIFETIME SEVEN
W/LIFETIME INCOME ACCELERATOR
MAXIMUM CHARGE/ 3/ 2.00% 0.65% + 2.00%
(ASSESSED AGAINST THE PWV)
CURRENT CHARGE 0.95% 0.65% + 0.95%
(ASSESSED AGAINST THE PWV)
-------------------------------------------------------------------------
SPOUSAL HIGHEST DAILY LIFETIME SEVEN
INCOME BENEFIT
MAXIMUM CHARGE/ 3/ 1.50% 0.65% + 1.50%
(ASSESSED AGAINST THE PWV)
CURRENT CHARGE 0.75% 0.65% + 0.75%
(ASSESSED AGAINST THE PWV)
-------------------------------------------------------------------------
7
------------------------------------------------------------------------
YOUR OPTIONAL BENEFIT FEES AND
CHARGES /1/
------------------------------------------------------------------------
OPTIONAL BENEFIT OPTIONAL BENEFIT/ TOTAL ANNUAL
FEE CHARGE CHARGE /2/
------------------------------------------------------------------------
SPOUSAL HIGHEST DAILY LIFETIME SEVEN
W/BENEFICIARY INCOME OPTION
MAXIMUM CHARGE /3/ 2.00% 0.65% + 2.00%
(ASSESSED AGAINST THE PWV)
CURRENT CHARGE 0.95% 0.65% + 0.95%
(ASSESSED AGAINST THE PWV)
------------------------------------------------------------------------
HIGHEST DAILY LIFETIME 7 PLUS
MAXIMUM CHARGE /3/ 1.50% 0.65% + 1.50%
(ASSESSED AGAINST THE GREATER OF
ACCOUNT VALUE AND PWV)
CURRENT CHARGE 0.75% 0.65% + 0.75%
(ASSESSED AGAINST THE GREATER OF
ACCOUNT VALUE AND PWV)
------------------------------------------------------------------------
HIGHEST DAILY LIFETIME 7 PLUS WITH
BENEFICIARY INCOME OPTION
MAXIMUM CHARGE /3/ 2.00% 0.65% + 2.00%
(ASSESSED AGAINST THE GREATER OF
ACCOUNT VALUE AND PWV)
CURRENT CHARGE 1.10% 0.65% + 1.10%
(ASSESSED AGAINST THE GREATER OF
ACCOUNT VALUE AND PWV)
------------------------------------------------------------------------
HIGHEST DAILY LIFETIME 7 PLUS WITH
LIFETIME INCOME ACCELERATOR
MAXIMUM CHARGE /3/ 2.00% 0.65% + 2.00%
(ASSESSED AGAINST THE GREATER OF
ACCOUNT VALUE AND PWV)
CURRENT CHARGE 1.10% 0.65% + 1.10%
(ASSESSED AGAINST THE GREATER OF
ACCOUNT VALUE AND PWV)
------------------------------------------------------------------------
SPOUSAL HIGHEST DAILY LIFETIME 7 PLUS
MAXIMUM CHARGE /3/ (ASSESSED AGAINST 1.50% 0.65% + 1.50%
THE GREATER OF ACCOUNT VALUE AND PWV)
CURRENT CHARGE (ASSESSED AGAINST THE 0.90% 0.65% + 0.90%
GREATER OF ACCOUNT VALUE AND PWV)
------------------------------------------------------------------------
SPOUSAL HIGHEST DAILY LIFETIME 7 PLUS
WITH BENEFICIARY INCOME OPTION
MAXIMUM CHARGE /3/ (ASSESSED AGAINST 2.00% 0.65% + 2.00%
THE GREATER OF ACCOUNT VALUE AND PWV)
CURRENT CHARGE (ASSESSED AGAINST THE 1.10% 0.65% + 1.10%
GREATER OF ACCOUNT VALUE AND PWV)
------------------------------------------------------------------------
ENHANCED BENEFICIARY PROTECTION DEATH
BENEFIT
CURRENT CHARGE AND MAXIMUM CHARGE 0.25% 0.90%
/4/ (ASSESSED AGAINST SUB-ACCOUNT NET
ASSETS)
------------------------------------------------------------------------
HIGHEST ANNIVERSARY VALUE DEATH
BENEFIT ("HAV")
CURRENT CHARGE AND MAXIMUM CHARGE/ 0.40% 1.05%
4/ (IF ELECTED ON OR AFTER MAY 1,
2009) (ASSESSED AGAINST SUB-ACCOUNT
NET ASSETS)
------------------------------------------------------------------------
COMBINATION 5% ROLL-UP AND HAV DEATH
BENEFIT
CURRENT CHARGE AND MAXIMUM CHARGE/ 0.80% 1.45%
4/ (IF ELECTED ON OR AFTER MAY 1,
2009) (ASSESSED AGAINST SUB-ACCOUNT
NET ASSETS)
------------------------------------------------------------------------
8
-----------------------------------------------------------------------
YOUR OPTIONAL BENEFIT FEES AND
CHARGES /1/
-----------------------------------------------------------------------
OPTIONAL BENEFIT OPTIONAL BENEFIT/ TOTAL ANNUAL
FEE CHARGE CHARGE /2/
-----------------------------------------------------------------------
HIGHEST DAILY VALUE DEATH BENEFIT
("HDV")
CURRENT CHARGE AND MAXIMUM CHARGE 0.50% 1.15%
/4/ (ASSESSED AGAINST SUB-ACCOUNT NET
ASSETS)
-----------------------------------------------------------------------
HOW CHARGE IS DETERMINED
1 GUARANTEED RETURN OPTION PLUS/ GUARANTEED RETURN OPTION: Charge for each
benefit is assessed against the average daily net assets of the
Sub-accounts. 0.90% total annual charge applies. This benefit is no longer
available for new elections.
GRO PLUS 2008: Charge for this benefit is assessed against the average
daily net assets of the Sub-accounts. If you elected the benefit prior to
May 1, 2009, the fees are as follows: 0.35% of Sub-account assets. 1.00%
total annual charge applies. If you elect the benefit on or after May 1,
2009, the total annual charge is 1.25%. This benefit is no longer available
for new election.
HIGHEST DAILY GRO: Charge for this benefit is assessed against the average
daily net assets of the Sub-accounts. If you elected the benefit prior to
May 1, 2009, the fees are as follows: 0.35% of Sub-account assets. 1.00%
total annual charge applies. If you elect the benefit on or after May 1,
2009, the total annual charge is 1.25%. This benefit is no longer available
for new election.
GUARANTEED MINIMUM WITHDRAWAL BENEFIT: Charge for this benefit is assessed
against the average daily net assets of the Sub-accounts. 1.00% total
annual charge applies. This benefit is no longer available for new
elections.
GUARANTEED MINIMUM INCOME BENEFIT: Charge for this benefit is assessed
against the GMIB Protected Income Value ("PIV"). As discussed in the
description of the benefit, the charge is taken out of the Sub-accounts and
the Fixed Allocations. 0.50% of PIV for GMIB is in addition to 0.65% annual
charge. This benefit is no longer available for new elections.
LIFETIME FIVE INCOME BENEFIT: Charge for this benefit is assessed against
the average daily net assets of the Sub-accounts. 1.25% total annual charge
applies. This benefit is no longer available for new elections.
SPOUSAL LIFETIME FIVE INCOME BENEFIT: Charge for this benefit is assessed
against the average daily net assets of the Sub-accounts. 1.40% total
annual charge applies. This benefit is no longer available for new
elections.
HIGHEST DAILY LIFETIME FIVE INCOME BENEFIT: Charge for this benefit is
assessed against the average daily net assets of the Sub-accounts. 1.25%
total annual charge applies. This benefit is no longer available for new
elections.
HIGHEST DAILY LIFETIME SEVEN INCOME BENEFIT: Charge for this benefit is
assessed against the Protected Withdrawal Value ("PWV"). PWV is described
in the Living Benefits section of this Prospectus. As discussed in the
description of the benefit, the charge is taken out of the Sub-accounts.
0.60% is in addition to 0.65% annual charge. This benefit is no longer
available for new elections.
HIGHEST DAILY LIFETIME SEVEN WITH BIO. Charge for this benefit is assessed
against the Protected Withdrawal Value ("PWV"). As discussed in the
description of the benefit, the charge is taken out of the Sub-accounts.
0.95% is in addition to 0.65% of amounts invested in Sub-accounts. This
benefit is no longer available for new elections.
HIGHEST DAILY LIFETIME SEVEN WITH LIA. Charge for this benefit is assessed
against the Protected Withdrawal Value ("PWV"). As discussed in the
description of the benefit, the charge is taken out of the Sub-accounts.
0.95% is in addition to 0.65% annual charge of amounts invested in
Sub-accounts. This benefit is no longer available for new elections.
SPOUSAL HIGHEST DAILY LIFETIME SEVEN INCOME BENEFIT: Charge for this
benefit is assessed against the Protected Withdrawal Value ("PWV"). As
discussed in the description of the benefit, the charge is taken out of the
Sub-accounts. 0.75% is in addition to 0.65% annual charge. This benefit is
no longer available for new elections.
SPOUSAL HIGHEST DAILY LIFETIME SEVEN WITH BIO. Charge for this benefit is
assessed against the Protected Withdrawal Value ("PWV"). As discussed in
the description of the benefit, the charge is taken out of the
Sub-accounts. 0.95% is in addition to 0.65% annual charge of amounts
invested in the Sub-accounts. This benefit is no longer available for new
elections.
HIGHEST DAILY LIFETIME 7 PLUS. Charge for this benefit is assessed against
the greater of Account Value and PWV. As discussed in the description of
the benefit, the charge is taken out of the Sub-accounts and the DCA Fixed
Rate Options, if applicable. 0.75% is in addition to 0.65% annual charge of
amounts invested in the Sub-accounts. This benefit is no longer available
for new elections.
HIGHEST DAILY LIFETIME 7 PLUS WITH BIO. Charge for this benefit is assessed
against the greater of Account Value and PWV. As discussed in the
description of the benefit, the charge is taken out of the Sub-accounts and
the DCA Fixed Rate Options, if applicable. 1.10% is in addition to 0.65%
annual charge of amounts invested in the Sub-accounts. This benefit is no
longer available for new elections.
HIGHEST DAILY LIFETIME 7 PLUS WITH LIA. Charge for this benefit is assessed
against the greater of Account Value and PWV. As discussed in the
description of the benefit, the charge is taken out of the Sub-accounts and
the DCA Fixed Rate Options, if applicable. 1.10% is in addition to 0.65%
annual charge of amounts invested in the Sub-accounts. This benefit is no
longer available for new elections.
SPOUSAL HIGHEST DAILY LIFETIME 7 PLUS. Charge for this benefit is assessed
against the greater of Account Value and PWV. As discussed in the
description of the benefit, the charge is taken out of the Sub-accounts and
the DCA Fixed Rate Options, if applicable. 0.90% is in addition to 0.65%
annual charge of amounts invested in the Sub-accounts. This benefit is no
longer available for new elections.
SPOUSAL HIGHEST DAILY LIFETIME 7 PLUS WITH BIO. Charge for this benefit is
assessed against the greater of Account Value and PWV. As discussed in the
description of the benefit, the charge is taken out of the Sub-accounts and
the DCA Fixed Rate Options, if applicable. 1.10% is in addition to 0.65%
annual charge of amounts invested in the Sub-accounts. This benefit is no
longer available for new elections.
HIGHEST DAILY LIFETIME 6 PLUS. Charge for this benefit is assessed against
the greater of Account Value and PWV. As discussed in the description of
the benefit, the charge is taken out of the Sub-accounts and the DCA Fixed
Rate Options, if applicable. 0.85% is in addition to 0.65% annual charge of
amounts invested in the Sub-accounts.
HIGHEST DAILY LIFETIME 6 PLUS WITH LIA. Charge for this benefit is assessed
against the greater of Account Value and PWV. As discussed in the
description of the benefit, the charge is taken out of the Sub-accounts and
the DCA Fixed Rate Options, if applicable. 1.20% is in addition to 0.65%
annual charge of amounts invested in the Sub-accounts.
SPOUSAL HIGHEST DAILY LIFETIME 6 PLUS. Charge for this benefit is assessed
against the greater of Account Value and PWV. As discussed in the
description of the benefit, the charge is taken out of the Sub-accounts and
the DCA Fixed Rate Options, if applicable. 0.95% is in addition to 0.65%
annual charge of amounts invested in the Sub-accounts.
ENHANCED BENEFICIARY PROTECTION DEATH BENEFIT: Charge for this benefit is
assessed against the average daily net assets of the Sub-accounts. 0.90%
total annual charge applies. This benefit is no longer available for new
elections.
HIGHEST ANNIVERSARY VALUE DEATH BENEFIT: Charge for this benefit is
assessed against the average daily net assets of the Sub-accounts. If you
elected the benefit prior to May 1, 2009, the fee was 0.25% of Sub-account
assets. 0.90% total annual charge applies. If you elected the benefit on or
after May 1, 2009, the total annual charge is 1.05%.
9
COMBINATION 5% ROLL-UP AND HAV DEATH BENEFIT: Charge for this benefit is
assessed against the average daily net assets of the Sub-accounts. If you
elected the benefit prior to May 1, 2009, the fee was 0.50% of average
daily net assets and the total annual charge is 1.15%. If you elected the
benefit on or after May 1, 2009, the total annual charge is 1.45%.
HIGHEST DAILY VALUE DEATH BENEFIT: Charge for this benefit is assessed
against the average daily net assets of the Sub-accounts. 1.15% total
annual charge applies in all
Annuity years. This benefit is no longer available for new elections.
2 The Total Annual Charge includes the Insurance Charge and assessed against
the average daily net assets allocated to the Sub-accounts. If you elect
more than one optional benefit, the Total Annual Charge would be increased
to include the charge for each optional benefit. With respect to GMIB, the
0.50% charge is assessed against the GMIB Protected Income Value. With
respect to Highest Daily Lifetime Seven, Spousal Highest Daily Lifetime
Seven, Highest Daily Lifetime 7 Plus, Spousal Highest Daily Lifetime 7
Plus, Highest Daily Lifetime 6 Plus and Spousal Highest Daily Lifetime 6
Plus the charge is assessed against the Protected Withdrawal Value (greater
of PWV and Account Value for the "Plus" benefits). With respect to each of
Highest Daily Lifetime Seven, Spousal Highest Daily Lifetime Seven, Highest
Daily Lifetime 7 Plus, Spousal Highest Daily Lifetime 7 Plus, Highest Daily
Lifetime 6 Plus and Spousal Highest Daily Lifetime 6 Plus one-fourth of the
annual charge is deducted quarterly. These optional benefits are not
available under the Beneficiary Continuation Option.
3 We reserve the right to increase the charge up to the maximum charge
indicated, upon any step-up or reset under the benefit, or new election of
the benefit.
4 Our reference in the fee table to "current and maximum" charge does not
connote that we have the authority to increase the charge for Annuities
that already have been issued. Rather, the reference indicates that there
is no maximum charge to which the current charge could be increased for
existing Annuities. However, our State filings may have included a
provision allowing us to impose an increased charge for newly-issued
Annuities.
The following table provides the range (minimum and maximum) of the total
annual expenses for the underlying mutual funds ("Portfolios") as of
December 31, 2011 before any contractual waivers and expense reimbursements.
Each figure is stated as a percentage of the underlying Portfolio's average
daily net assets.
----------------------------------------------------
TOTAL ANNUAL PORTFOLIO OPERATING EXPENSES
----------------------------------------------------
MINIMUM MAXIMUM
----------------------------------------------------
TOTAL PORTFOLIO OPERATING EXPENSE 0.62% 2.08%
----------------------------------------------------
The following are the total annual expenses for each underlying mutual fund
("Portfolio") as of December 31, 2011, except as noted and except if the
underlying portfolio's inception date is subsequent to December 31, 2011. The
"Total Annual Portfolio Operating Expenses" reflect the combination of the
underlying Portfolio's investment management fee, other expenses, any 12b-1
fees, and certain other expenses. Each figure is stated as a percentage of the
underlying Portfolio's average daily net assets. For certain of the
Portfolios, a portion of the management fee has been contractually waived
and/or other expenses have been contractually partially reimbursed, which is
shown in the table. The following expenses are deducted by the underlying
Portfolio before it provides Prudential Annuities with the daily net asset
value. The underlying Portfolio information was provided by the underlying
mutual funds and has not been independently verified by us. See the
prospectuses or statements of additional information of the underlying
Portfolios for further details. The current prospectus and statement of
additional information for the underlying Portfolios can be obtained by
calling 1-888-PRU-2888.
------------------------------------------------------------------------------------------------------------------------------------
UNDERLYING MUTUAL FUND PORTFOLIO ANNUAL EXPENSES
(as a percentage of the average net assets of the underlying Portfolios)
------------------------------------------------------------------------------------------------------------------------------------
For the year ended December 31, 2011
-------------------------------------------------------------------------------------------
UNDERLYING Total
PORTFOLIO Broker Fees Acquired Annual Contractual
Dividend and Expenses Portfolio Portfolio Fee Waiver
Management Other Distribution Expense on on Short Fees & Operating or Expense
Fees Expenses (12b-1) Fees Short Sales Sales Expenses Expenses Reimbursement
--------------------------------------------------------------------------------------------------------------------------
ADVANCED SERIES TRUST
AST Academic Strategies
Asset Allocation 0.72% 0.07% 0.00% 0.05% 0.01% 0.68% 1.53% 0.00%
AST Advanced Strategies 0.85% 0.14% 0.00% 0.00% 0.00% 0.03% 1.02% 0.00%
AST Balanced Asset
Allocation 0.15% 0.01% 0.00% 0.00% 0.00% 0.85% 1.01% 0.00%
AST Blackrock Global
Strategies 1.00% 0.15% 0.00% 0.00% 0.00% 0.02% 1.17% 0.00%
AST Blackrock Value 0.85% 0.12% 0.00% 0.00% 0.00% 0.00% 0.97% 0.00%
AST Bond Portfolio 2015/ 1/ 0.64% 0.23% 0.00% 0.00% 0.00% 0.00% 0.87% 0.00%
AST Bond Portfolio 2016/ 1/ 0.64% 0.34% 0.00% 0.00% 0.00% 0.00% 0.98% 0.00%
AST Bond Portfolio 2017/ 1/ 0.64% 0.16% 0.00% 0.00% 0.00% 0.00% 0.80% 0.00%
AST Bond Portfolio 2018/ 1/ 0.64% 0.14% 0.00% 0.00% 0.00% 0.00% 0.78% 0.00%
AST Bond Portfolio 2019/ 1/ 0.64% 0.31% 0.00% 0.00% 0.00% 0.00% 0.95% 0.00%
AST Bond Portfolio 2020/ 1/ 0.64% 0.32% 0.00% 0.00% 0.00% 0.00% 0.96% 0.00%
AST Bond Portfolio 2021/ 1/ 0.64% 0.14% 0.00% 0.00% 0.00% 0.00% 0.78% 0.00%
AST Bond Portfolio 2022/ 1/ 0.64% 0.27% 0.00% 0.00% 0.00% 0.00% 0.91% 0.00%
------------------------------------------------------------------------------------------------------------------------------------
UNDERLYING MUTUAL FUND PORTFOLIO ANNUAL EXPENSES
(as a percentage of the average net assets of the underlying Portfolios)
------------------------------------------------------------------------------------------------------------------------------------
-----------
UNDERLYING
PORTFOLIO Net Annual
Fund
Operating
Expenses
----------------------------------------
ADVANCED SERIES TRUST
AST Academic Strategies
Asset Allocation 1.53%
AST Advanced Strategies 1.02%
AST Balanced Asset
Allocation 1.01%
AST Blackrock Global
Strategies 1.17%
AST Blackrock Value 0.97%
AST Bond Portfolio 2015/ 1/ 0.87%
AST Bond Portfolio 2016/ 1/ 0.98%
AST Bond Portfolio 2017/ 1/ 0.80%
AST Bond Portfolio 2018/ 1/ 0.78%
AST Bond Portfolio 2019/ 1/ 0.95%
AST Bond Portfolio 2020/ 1/ 0.96%
AST Bond Portfolio 2021/ 1/ 0.78%
AST Bond Portfolio 2022/ 1/ 0.91%
10
------------------------------------------------------------------------------------------------------------------------------------
UNDERLYING MUTUAL FUND PORTFOLIO ANNUAL EXPENSES
(as a percentage of the average net assets of the underlying Portfolios)
------------------------------------------------------------------------------------------------------------------------------------
For the year ended December 31, 2011
-------------------------------------------------------------------------------------------
UNDERLYING Total
PORTFOLIO Broker Fees Acquired Annual Contractual
Dividend and Expenses Portfolio Portfolio Fee Waiver
Management Other Distribution Expense on on Short Fees & Operating or Expense
Fees Expenses (12b-1) Fees Short Sales Sales Expenses Expenses Reimbursement
--------------------------------------------------------------------------------------------------------------------------
ADVANCED SERIES TRUST
CONTINUED
AST Bond Portfolio 2023/ 1/ 0.64% 0.34% 0.00% 0.00% 0.00% 0.00% 0.98% 0.00%
AST Capital Growth Asset
Allocation 0.15% 0.01% 0.00% 0.00% 0.00% 0.88% 1.04% 0.00%
AST CLS Moderate Asset
Allocation 0.30% 0.02% 0.00% 0.00% 0.00% 0.71% 1.03% 0.00%
AST Cohen & Steers Realty 1.00% 0.14% 0.00% 0.00% 0.00% 0.00% 1.14% 0.00%
AST Federated Aggressive
Growth 0.95% 0.17% 0.00% 0.00% 0.00% 0.00% 1.12% 0.00%
AST FI Pyramis(R) Asset
Allocation /15/ 0.85% 0.20% 0.00% 0.24% 0.04% 0.00% 1.33% 0.00%
AST First Trust Balanced
Target 0.85% 0.13% 0.00% 0.00% 0.00% 0.00% 0.98% 0.00%
AST First Trust Capital
Appreciation Target 0.85% 0.13% 0.00% 0.00% 0.00% 0.00% 0.98% 0.00%
AST Franklin Templeton
Founding Funds
Allocation/ 2/ 0.95% 0.16% 0.00% 0.00% 0.00% 0.00% 1.11% -0.01%
AST Global Real Estate 1.00% 0.18% 0.00% 0.00% 0.00% 0.00% 1.18% 0.00%
AST Goldman Sachs
Concentrated Growth 0.90% 0.12% 0.00% 0.00% 0.00% 0.00% 1.02% 0.00%
AST Goldman Sachs
Large-Cap Value 0.75% 0.12% 0.00% 0.00% 0.00% 0.00% 0.87% 0.00%
AST Goldman Sachs
Mid-Cap Growth 1.00% 0.13% 0.00% 0.00% 0.00% 0.00% 1.13% 0.00%
AST Goldman Sachs
Small-Cap Value 0.95% 0.15% 0.00% 0.00% 0.00% 0.09% 1.19% 0.00%
AST High Yield 0.75% 0.13% 0.00% 0.00% 0.00% 0.00% 0.88% 0.00%
AST Horizon Growth Asset
Allocation 0.30% 0.02% 0.00% 0.00% 0.00% 0.78% 1.10% 0.00%
AST Horizon Moderate
Asset Allocation 0.30% 0.02% 0.00% 0.00% 0.00% 0.71% 1.03% 0.00%
AST International Growth 1.00% 0.15% 0.00% 0.00% 0.00% 0.00% 1.15% 0.00%
AST International Value 1.00% 0.15% 0.00% 0.00% 0.00% 0.00% 1.15% 0.00%
AST Investment Grade
Bond/ 1/ 0.64% 0.11% 0.00% 0.00% 0.00% 0.00% 0.75% 0.00%
AST Jennison Large-Cap
Growth 0.90% 0.12% 0.00% 0.00% 0.00% 0.00% 1.02% 0.00%
AST Jennison Large-Cap
Value 0.75% 0.12% 0.00% 0.00% 0.00% 0.00% 0.87% 0.00%
AST JPMorgan
International Equity 0.88% 0.17% 0.00% 0.00% 0.00% 0.00% 1.05% 0.00%
AST JPMorgan Strategic
Opportunities 1.00% 0.16% 0.00% 0.10% 0.01% 0.00% 1.27% 0.00%
AST Large-Cap Value 0.75% 0.12% 0.00% 0.00% 0.00% 0.00% 0.87% 0.00%
AST Lord Abbett Core-
Fixed Income/ 3/ 0.80% 0.13% 0.00% 0.00% 0.00% 0.00% 0.93% -0.11%
AST Marsico Capital
Growth 0.90% 0.12% 0.00% 0.00% 0.00% 0.00% 1.02% 0.00%
AST MFS Global Equity 1.00% 0.20% 0.00% 0.00% 0.00% 0.00% 1.20% 0.00%
AST MFS Growth 0.90% 0.13% 0.00% 0.00% 0.00% 0.00% 1.03% 0.00%
------------------------------------------------------------------------------------------------------------------------------------
UNDERLYING MUTUAL FUND PORTFOLIO ANNUAL EXPENSES
(as a percentage of the average net assets of the underlying Portfolios)
------------------------------------------------------------------------------------------------------------------------------------
-----------
UNDERLYING
PORTFOLIO Net Annual
Fund
Operating
Expenses
----------------------------------------
ADVANCED SERIES TRUST
CONTINUED
AST Bond Portfolio 2023/ 1/ 0.98%
AST Capital Growth Asset
Allocation 1.04%
AST CLS Moderate Asset
Allocation 1.03%
AST Cohen & Steers Realty 1.14%
AST Federated Aggressive
Growth 1.12%
AST FI Pyramis(R) Asset
Allocation /15/ 1.33%
AST First Trust Balanced
Target 0.98%
AST First Trust Capital
Appreciation Target 0.98%
AST Franklin Templeton
Founding Funds
Allocation/ 2/ 1.10%
AST Global Real Estate 1.18%
AST Goldman Sachs
Concentrated Growth 1.02%
AST Goldman Sachs
Large-Cap Value 0.87%
AST Goldman Sachs
Mid-Cap Growth 1.13%
AST Goldman Sachs
Small-Cap Value 1.19%
AST High Yield 0.88%
AST Horizon Growth Asset
Allocation 1.10%
AST Horizon Moderate
Asset Allocation 1.03%
AST International Growth 1.15%
AST International Value 1.15%
AST Investment Grade
Bond/ 1/ 0.75%
AST Jennison Large-Cap
Growth 1.02%
AST Jennison Large-Cap
Value 0.87%
AST JPMorgan
International Equity 1.05%
AST JPMorgan Strategic
Opportunities 1.27%
AST Large-Cap Value 0.87%
AST Lord Abbett Core-
Fixed Income/ 3/ 0.82%
AST Marsico Capital
Growth 1.02%
AST MFS Global Equity 1.20%
AST MFS Growth 1.03%
11
--------------------------------------------------------------------------------------------------------------------------------
UNDERLYING MUTUAL FUND PORTFOLIO
ANNUAL EXPENSES
(as a percentage of the average
net assets of the underlying
Portfolios)
--------------------------------------------------------------------------------------------------------------------------------
For the year ended December 31, 2011
------------------------------------------------------------------------------------------------------
UNDERLYING PORTFOLIO Total
Broker Fees Acquired Annual Contractual Net Annual
Dividend and Expenses Portfolio Portfolio Fee Waiver Fund
Management Other Distribution Expense on on Short Fees & Operating or Expense Operating
Fees Expenses (12b-1) Fees Short Sales Sales Expenses Expenses Reimbursement Expenses
--------------------------------------------------------------------------------------------------------------------------------
ADVANCED SERIES TRUST
CONTINUED
AST Mid-Cap Value 0.95% 0.14% 0.00% 0.00% 0.00% 0.00% 1.09% 0.00% 1.09%
AST Money Market 0.50% 0.12% 0.00% 0.00% 0.00% 0.00% 0.62% 0.00% 0.62%
AST Neuberger Berman/
LSV Mid-Cap Value 0.90% 0.14% 0.00% 0.00% 0.00% 0.00% 1.04% 0.00% 1.04%
AST Neuberger Berman
Core Bond/ 4/ 0.70% 0.17% 0.00% 0.00% 0.00% 0.00% 0.87% -0.01% 0.86%
AST Neuberger Berman
Mid-Cap Growth 0.90% 0.13% 0.00% 0.00% 0.00% 0.00% 1.03% 0.00% 1.03%
AST New Discovery Asset
Allocation/ 5/ 0.85% 0.26% 0.00% 0.00% 0.00% 0.00% 1.11% -0.03% 1.08%
AST Parametric Emerging
Markets Equity 1.10% 0.35% 0.00% 0.00% 0.00% 0.00% 1.45% 0.00% 1.45%
AST PIMCO Limited
Maturity Bond 0.65% 0.13% 0.00% 0.00% 0.00% 0.00% 0.78% 0.00% 0.78%
AST PIMCO Total Return
Bond 0.65% 0.12% 0.00% 0.00% 0.00% 0.00% 0.77% 0.00% 0.77%
AST Preservation Asset
Allocation 0.15% 0.01% 0.00% 0.00% 0.00% 0.80% 0.96% 0.00% 0.96%
AST Prudential Core
Bond/ 4/ 0.70% 0.14% 0.00% 0.00% 0.00% 0.00% 0.84% -0.03% 0.81%
AST QMA US Equity Alpha 1.00% 0.17% 0.00% 0.25% 0.24% 0.00% 1.66% 0.00% 1.66%
AST Quantitative
Modeling 0.25% 0.30% 0.00% 0.00% 0.00% 0.87% 1.42% 0.00% 1.42%
AST Schroders Global
Tactical 0.95% 0.14% 0.00% 0.00% 0.00% 0.15% 1.24% 0.00% 1.24%
AST Schroders
Multi-Asset World
Strategies 1.10% 0.14% 0.00% 0.00% 0.00% 0.00% 1.24% 0.00% 1.24%
AST Small-Cap Growth 0.90% 0.14% 0.00% 0.00% 0.00% 0.00% 1.04% 0.00% 1.04%
AST Small-Cap Value 0.90% 0.14% 0.00% 0.00% 0.00% 0.03% 1.07% 0.00% 1.07%
AST T. Rowe Price Asset
Allocation 0.85% 0.13% 0.00% 0.00% 0.00% 0.00% 0.98% 0.00% 0.98%
AST T. Rowe Price
Equity Income 0.75% 0.16% 0.00% 0.00% 0.00% 0.00% 0.91% 0.00% 0.91%
AST T. Rowe Price
Global Bond 0.80% 0.18% 0.00% 0.00% 0.00% 0.00% 0.98% 0.00% 0.98%
AST T. Rowe Price Large
Cap Growth 0.88% 0.12% 0.00% 0.00% 0.00% 0.00% 1.00% 0.00% 1.00%
AST T. Rowe Price
Natural Resources 0.90% 0.14% 0.00% 0.00% 0.00% 0.00% 1.04% 0.00% 1.04%
AST Wellington
Management Hedged
Equity 1.00% 0.14% 0.00% 0.00% 0.00% 0.00% 1.14% 0.00% 1.14%
AST Western Asset Core
Plus Bond 0.70% 0.13% 0.00% 0.00% 0.00% 0.00% 0.83% 0.00% 0.83%
--------------------------------------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------------------------------------
FIRST DEFINED PORTFOLIO
FUND, LLC
First Trust Target
Focus Four Portfolio 0.60% 1.23% 0.25% 0.00% 0.00% 0.00% 2.08% 0.71% 1.37%
Global Dividend Target
15 Portfolio 0.60% 0.96% 0.25% 0.00% 0.00% 0.00% 1.81% 0.34% 1.47%
12
------------------------------------------------------------------------------------------------------------------------------------
UNDERLYING MUTUAL FUND PORTFOLIO ANNUAL EXPENSES
(as a percentage of the average net assets of the underlying Portfolios)
------------------------------------------------------------------------------------------------------------------------------------
For the year ended December 31, 2011
-------------------------------------------------------------------------------------------
UNDERLYING Total
PORTFOLIO Broker Fees Acquired Annual Contractual
Dividend and Expenses Portfolio Portfolio Fee Waiver
Management Other Distribution Expense on on Short Fees & Operating or Expense
Fees Expenses (12b-1) Fees Short Sales Sales Expenses Expenses Reimbursement
--------------------------------------------------------------------------------------------------------------------------
FIRST DEFINED PORTFOLIO
FUND, LLC CONTINUED
NASDAQ(R) Target 15
Portfolio 0.60% 1.16% 0.25% 0.00% 0.00% 0.00% 2.01% 0.54%
S&P(R) Target 24 Portfolio 0.60% 0.96% 0.25% 0.00% 0.00% 0.00% 1.81% 0.34%
Target Managed VIP
Portfolio 0.60% 0.84% 0.25% 0.00% 0.00% 0.00% 1.69% 0.22%
The Dow(R) DART 10
Portfolio 0.60% 1.11% 0.25% 0.00% 0.00% 0.00% 1.96% 0.49%
The Dow(R) Target Dividend
Portfolio 0.60% 0.73% 0.25% 0.00% 0.00% 0.00% 1.58% 0.11%
Value Line(R) Target 25
Portfolio 0.60% 0.96% 0.25% 0.00% 0.00% 0.00% 1.81% 0.34%
--------------------------------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------------------------------
GUGGENHEIM INVESTMENTS
NASDAQ-100(R) Fund 0.75% 0.89% 0.00% 0.00% 0.00% 0.00% 1.64% 0.00%
Nova Fund 0.75% 0.86% 0.00% 0.00% 0.00% 0.00% 1.61% 0.00%
Rydex Inverse S&P 500
Strategy Fund 0.90% 0.85% 0.00% 0.00% 0.00% 0.00% 1.75% 0.00%
--------------------------------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------------------------------
AIM VARIABLE INSURANCE
FUNDS (INVESCO VARIABLE
INSURANCE FUNDS)
Invesco V.I. Diversified
Dividend Fund - Series I
shares /6/ 0.52% 0.15% 0.00% 0.00% 0.00% 0.00% 0.67% 0.00%
Invesco V.I. Global Health
Care Fund - Series I
shares /6/ 0.75% 0.37% 0.00% 0.00% 0.00% 0.00% 1.12% 0.00%
Invesco V.I. Technology
Fund - Series I shares /6/ 0.75% 0.37% 0.00% 0.00% 0.00% 0.00% 1.12% 0.00%
Invesco Van Kampen V.I.
Mid Cap Growth Fund -
Series I shares /7/ 0.75% 0.33% 0.00% 0.00% 0.00% 0.00% 1.08% 0.00%
--------------------------------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------------------------------
NATIONWIDE VARIABLE
INSURANCE TRUST
NVIT Developing Markets
Fund 0.95% 0.42% 0.25% 0.00% 0.00% 0.01% 1.63% 0.00%
--------------------------------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------------------------------
PROFUND VP
Access VP High Yield 0.75% 0.77% 0.25% 0.00% 0.00% 0.00% 1.77% 0.09%
Asia 30 0.75% 0.78% 0.25% 0.00% 0.00% 0.00% 1.78% 0.10%
Banks 0.75% 0.92% 0.25% 0.00% 0.00% 0.00% 1.92% 0.24%
Basic Materials 0.75% 0.78% 0.25% 0.00% 0.00% 0.00% 1.78% 0.10%
Bear 0.75% 0.71% 0.25% 0.00% 0.00% 0.00% 1.71% 0.03%
Biotechnology 0.75% 0.76% 0.25% 0.00% 0.00% 0.00% 1.76% 0.08%
Bull 0.75% 0.74% 0.25% 0.00% 0.00% 0.00% 1.74% 0.06%
Consumer Goods 0.75% 0.82% 0.25% 0.00% 0.00% 0.00% 1.82% 0.14%
Consumer Services 0.75% 0.94% 0.25% 0.00% 0.00% 0.00% 1.94% 0.26%
Europe 30 0.75% 0.79% 0.25% 0.00% 0.00% 0.00% 1.79% 0.11%
Financials 0.75% 0.80% 0.25% 0.00% 0.00% 0.00% 1.80% 0.12%
------------------------------------------------------------------------------------------------------------------------------------
UNDERLYING MUTUAL FUND PORTFOLIO ANNUAL EXPENSES
(as a percentage of the average net assets of the underlying Portfolios)
------------------------------------------------------------------------------------------------------------------------------------
-----------
UNDERLYING
PORTFOLIO Net Annual
Fund
Operating
Expenses
----------------------------------------
FIRST DEFINED PORTFOLIO
FUND, LLC CONTINUED
NASDAQ(R) Target 15
Portfolio 1.47%
S&P(R) Target 24 Portfolio 1.47%
Target Managed VIP
Portfolio 1.47%
The Dow(R) DART 10
Portfolio 1.47%
The Dow(R) Target Dividend
Portfolio 1.47%
Value Line(R) Target 25
Portfolio 1.47%
----------------------------------------
----------------------------------------
GUGGENHEIM INVESTMENTS
NASDAQ-100(R) Fund 1.64%
Nova Fund 1.61%
Rydex Inverse S&P 500
Strategy Fund 1.75%
----------------------------------------
----------------------------------------
AIM VARIABLE INSURANCE
FUNDS (INVESCO VARIABLE
INSURANCE FUNDS)
Invesco V.I. Diversified
Dividend Fund - Series I
shares /6/ 0.67%
Invesco V.I. Global Health
Care Fund - Series I
shares /6/ 1.12%
Invesco V.I. Technology
Fund - Series I shares /6/ 1.12%
Invesco Van Kampen V.I.
Mid Cap Growth Fund -
Series I shares /7/ 1.08%
----------------------------------------
----------------------------------------
NATIONWIDE VARIABLE
INSURANCE TRUST
NVIT Developing Markets
Fund 1.63%
----------------------------------------
----------------------------------------
PROFUND VP
Access VP High Yield 1.68%
Asia 30 1.68%
Banks 1.68%
Basic Materials 1.68%
Bear 1.68%
Biotechnology 1.68%
Bull 1.68%
Consumer Goods 1.68%
Consumer Services 1.68%
Europe 30 1.68%
Financials 1.68%
13
--------------------------------------------------------------------------------------------------------------------------------
UNDERLYING MUTUAL FUND PORTFOLIO
ANNUAL EXPENSES
(as a percentage of the average
net assets of the underlying
Portfolios)
--------------------------------------------------------------------------------------------------------------------------------
For the year ended December 31, 2011
------------------------------------------------------------------------------------------------------
UNDERLYING PORTFOLIO Total
Broker Fees Acquired Annual Contractual Net Annual
Dividend and Expenses Portfolio Portfolio Fee Waiver Fund
Management Other Distribution Expense on on Short Fees & Operating or Expense Operating
Fees Expenses (12b-1) Fees Short Sales Sales Expenses Expenses Reimbursement Expenses
--------------------------------------------------------------------------------------------------------------------------------
PROFUND VP CONTINUED
Health Care 0.75% 0.77% 0.25% 0.00% 0.00% 0.00% 1.77% 0.09% 1.68%
Industrials 0.75% 0.90% 0.25% 0.00% 0.00% 0.00% 1.90% 0.22% 1.68%
Internet 0.75% 0.82% 0.25% 0.00% 0.00% 0.00% 1.82% 0.14% 1.68%
Japan 0.75% 1.00% 0.25% 0.00% 0.00% 0.00% 2.00% 0.32% 1.68%
Large-Cap Growth 0.75% 0.84% 0.25% 0.00% 0.00% 0.00% 1.84% 0.16% 1.68%
Large-Cap Value 0.75% 0.85% 0.25% 0.00% 0.00% 0.00% 1.85% 0.17% 1.68%
Mid-Cap Growth 0.75% 0.81% 0.25% 0.00% 0.00% 0.00% 1.81% 0.13% 1.68%
Mid-Cap Value 0.75% 0.84% 0.25% 0.00% 0.00% 0.03% 1.87% 0.16% 1.71%
NASDAQ-100 0.75% 0.82% 0.25% 0.00% 0.00% 0.00% 1.82% 0.14% 1.68%
Oil & Gas 0.75% 0.82% 0.25% 0.00% 0.00% 0.00% 1.82% 0.14% 1.68%
Pharmaceuticals 0.75% 0.80% 0.25% 0.00% 0.00% 0.00% 1.80% 0.12% 1.68%
Precious Metals 0.75% 0.79% 0.25% 0.00% 0.00% 0.00% 1.79% 0.11% 1.68%
Real Estate 0.75% 0.77% 0.25% 0.00% 0.00% 0.00% 1.77% 0.09% 1.68%
Rising Rates Opportunity 0.75% 0.70% 0.25% 0.00% 0.00% 0.00% 1.70% 0.02% 1.68%
Semiconductor 0.75% 1.00% 0.25% 0.00% 0.00% 0.00% 2.00% 0.32% 1.68%
Short Mid-Cap 0.75% 0.84% 0.25% 0.00% 0.00% 0.00% 1.84% 0.16% 1.68%
Short NASDAQ-100 0.75% 0.80% 0.25% 0.00% 0.00% 0.00% 1.80% 0.12% 1.68%
Short Small-Cap 0.75% 0.78% 0.25% 0.00% 0.00% 0.00% 1.78% 0.10% 1.68%
Small-Cap Growth 0.75% 0.86% 0.25% 0.00% 0.00% 0.00% 1.86% 0.18% 1.68%
Small-Cap Value 0.75% 0.94% 0.25% 0.00% 0.00% 0.02% 1.96% 0.26% 1.70%
Technology 0.75% 0.76% 0.25% 0.00% 0.00% 0.00% 1.76% 0.08% 1.68%
Telecommunications 0.75% 0.82% 0.25% 0.00% 0.00% 0.00% 1.82% 0.14% 1.68%
U.S. Government Plus 0.50% 0.76% 0.25% 0.00% 0.00% 0.00% 1.51% 0.17%/8/ 1.68%
UltraBull 0.75% 0.66% 0.25% 0.00% 0.00% 0.00% 1.66% 0.02%/8/ 1.68%
UltraMid-Cap/ 9/ 0.75% 0.81% 0.25% 0.00% 0.00% 0.00% 1.81% 0.13% 1.68%
UltraNASDAQ-100 0.75% 0.77% 0.25% 0.00% 0.00% 0.00% 1.77% 0.09% 1.68%
UltraSmall-Cap/ 9/ 0.75% 0.84% 0.25% 0.00% 0.00% 0.00% 1.84% 0.16% 1.68%
Utilities 0.75% 0.80% 0.25% 0.00% 0.00% 0.00% 1.80% 0.12% 1.68%
--------------------------------------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------------------------------------
THE PRUDENTIAL SERIES
FUND
SP International Growth 0.85% 0.36% 0.00% 0.00% 0.00% 0.00% 1.21% 0.00% 1.21%
--------------------------------------------------------------------------------------------------------------------------------
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WELLS FARGO VARIABLE
TRUST
Wells Fargo Advantage
VT International
Equity Fund - class 1/
10/ 0.75% 0.22% 0.00% 0.00% 0.00% 0.01% 0.98% 0.28% 0.70%
Wells Fargo Advantage
VT Intrinsic Value
Fund - class 2/ 11/ 0.55% 0.37% 0.25% 0.00% 0.00% 0.01% 1.18% 0.17% 1.01%
Wells Fargo Advantage
VT Omega Growth Fund -
class 1/ 12/ 0.55% 0.25% 0.00% 0.00% 0.00% 0.00% 0.80% 0.05% 0.75%
Wells Fargo Advantage
VT Small Cap Growth
Fund - class 1/ 13/ 0.75% 0.20% 0.00% 0.00% 0.00% 0.01% 0.96% 0.00% 0.96%
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FRANKLIN TEMPLETON
VARIABLE INSURANCE
PRODUCTS TRUST/ 14/
Franklin Templeton VIP
Founding Funds
Allocation Fund -
Class 4 0.00% 0.11% 0.35% 0.00% 0.00% 0.65% 1.11% 0.01% 1.10%
14
1 The Investment Managers (Prudential Investments LLC and AST Investment
Services, Inc.) have contractually agreed to waive a portion of their
investment management fees and/or reimburse certain expenses for the
Portfolio so that the Portfolio's investment management fees plus other
expenses (exclusive in all cases of taxes, interest, brokerage commissions,
distribution fees, acquired fund fees and expenses and extraordinary
expenses) do not exceed 1.00% of the Portfolio's average daily net assets
through April 30, 2013. This arrangement may not be terminated or modified
prior to April 30, 2013, and may be discontinued or modified thereafter.
The decision on whether to renew, modify or discontinue the arrangement
after April 30, 2013 will be subject to review by the Investment Managers
and the Fund's Board of Trustees.
2 The Investment Managers (Prudential Investments LLC and AST Investment
Services, Inc.) have contractually agreed to waive a portion of their
investment management fees and/or reimburse certain expenses so that the
investment management fees plus other expenses (exclusive in all cases of
taxes, short sale interest and dividend expenses, brokerage commissions,
distribution fees, underlying fund fees and expenses, and extraordinary
expenses) for the Portfolio do not exceed 1.10% of the average daily net
assets of the Portfolio through June 30, 2014. This expense limitation may
not be terminated or modified prior to June 30, 2014, but may be
discontinued or modified thereafter.
3 The Investment Managers (Prudential Investments LLC and AST Investment
Services, Inc.) have contractually agreed to waive a portion of their
investment management fee, so that the effective management fee rate paid
by the Portfolio is as follows: 0.70% to $500 million of average daily net
assets; 0.675% over $500 million in average daily net assets up to and
including $1 billion in average daily net assets; and 0.65% over $1 billion
in average daily net assets. This arrangement may not be terminated or
modified prior to June 30, 2014, and may be discontinued or modified
thereafter. The decision on whether to renew, modify or discontinue the
arrangement after June 30, 2014 will be subject to review by the Investment
Managers and the Fund's Board of Trustees.
4 Prudential Investments LLC and AST Investment Services, Inc. (together, the
Investment Managers) have contractually agreed to waive a portion of their
investment management fees so that the Portfolio's investment management
fee would equal 0.70% of the Portfolio's first $500 million of average
daily net assets, 0.675% of the Portfolio's average daily net assets
between $500 million and $1 billion, and 0.65% of the Portfolio's average
daily net assets in excess of $1 billion through May 1, 2014. This
contractual investment management fee waiver may not be terminated or
modified prior to May 1, 2014, but may be discontinued or modified
thereafter. The decision on whether to renew, modify, or discontinue this
expense limitation after May 1, 2014 will be subject to review by the
Investment Managers and the Board of Trustees of the Trust.
5 The Investment Managers (Prudential Investments LLC and AST Investment
Services, Inc.) have contractually agreed to waive a portion of their
investment management fees and/or reimburse certain expenses, so that the
investment management fees plus other expenses (exclusive in all cases of
taxes, short sale interest and dividend expenses, brokerage commissions,
distribution fees, acquired fund fees and expenses, and extraordinary
expenses) for the Portfolio do not exceed 1.08% of its average daily net
assets through June 30, 2013. This expense limitation may not be terminated
or modified prior to June 30, 2013, and may be discontinued or modified
thereafter. The decision on whether to renew, modify or discontinue the
expense limitation after June 30, 2013 will be subject to review by the
Investment Managers and the Fund's Board of Trustees.
6 The Adviser has contractually agreed, through at least April 30, 2013, to
waive advisory fees and/or reimburse expenses of Series I shares to the
extent necessary to limit Net Annual Fund Operating Expenses of Series I
shares to 1.30% of average daily net assets. In determining the Adviser's
obligation to waive advisory fees and/or reimburse expenses, the following
expenses are not taken into account, and could cause the Total Annual
Portfolio Operating Expenses and/or Contractual Fee Waiver or Expense
Reimbursement to exceed the numbers reflected above: (i) interest; (ii)
taxes; (iii) dividend expense on short sales; (iv) extraordinary or
non-routine items, including litigation expenses; (v) expenses that the
Portfolio has incurred but did not actually pay because of an expense
offset arrangement. Acquired Portfolio Fees and Expenses are also excluded
in determining such obligation. Unless the Board of Trustees and Invesco
Advisers, Inc. mutually agree to amend or continue the fee waiver
agreement, it will terminate on April 30, 2013.
7 The Adviser has contractually agreed, through at least June 30, 2014, to
waive advisory fees and/or reimburse expenses of Series I shares to the
extent necessary to limit Net Annual Fund Operating Expenses of Series I
shares to 1.09% of average daily net assets. In determining the Adviser's
obligation to waive advisory fees and/or reimburse expenses, the following
expenses are not taken into account, and could cause the Total Annual
Portfolio Operating Expenses and/or Contractual Fee Waiver or Expense
Reimbursement to exceed the numbers reflected above: (i) interest; (ii)
taxes; (iii) dividend expense on short sales; (iv) extraordinary or
non-routine items, including litigation expenses; (v) expenses that the
Portfolio has incurred but did not actually pay because of an expense
offset arrangement. Acquired Portfolio Fees and Expenses are also excluded
in determining such obligation. Unless the Board of Trustees and Invesco
Advisers, Inc. mutually agree to amend or continue the fee waiver
agreement, it will terminate on June 30, 2014.
8 ProFund Advisors LLC ("ProFund Advisors" or the "Advisor") has
contractually agreed to waive Investment Advisory and Management Services
Fees and to reimburse Other Expenses to the extent Total Annual Portfolio
Operating Expenses (excluding "Acquired Portfolio Fees and Expenses"), as a
percentage of average daily net assets, exceed 1.68% through April 30,
2013. After such date, the expense limitation may be terminated or revised
by the Advisor. Amounts waived or reimbursed in a particular contractual
period may be recouped by ProFund Advisors within three years of the end of
the contractual period to the extent that recoupment will not cause the
Fund's expenses to exceed any expense limitation in place at that time.
9 "Acquired Portfolio Fees and Expenses" for the fiscal year and December 31,
2011 were less than 0.01% and are included in "Other Expenses".
10 The Adviser has contractually agreed through July 18, 2013 to waive fees
and/or reimburse expenses to the extent necessary to cap the Fund's Net
Annual Fund Operating Expenses, excluding certain expenses, at 0.69% for
Class 1. After this time, such cap may be changed or the commitment to
maintain the cap may be terminated only with the approval of the Board of
Trustees.
11 The Adviser has contractually agreed through July 18, 2013 to waive fees
and/or reimburse expenses to the extent necessary to cap the Fund's Net
Annual Fund Operating Expenses, excluding certain expenses, at 1.00% for
Class 2. After this time, such cap may be changed or the commitment to
maintain the cap may be terminated only with the approval of the Board of
Trustees.
12 The Adviser has contractually agreed through July 18, 2013 to waive fees
and/or reimburse expenses to the extent necessary to cap the Fund's Net
Annual Fund Operating Expenses, excluding certain expenses, at 0.75%. After
this time, such cap may be changed or the commitment to maintain the cap
may be terminated only with the approval of the Board of Trustees.
13 The Adviser has contractually agreed through July 18, 2013 to waive fees
and/or reimburse expenses to the extent necessary to cap the Fund's Net
Annual Fund Operating Expenses, excluding certain expenses, at 0.95% for
Class 1. After this time, such cap may be changed or the commitment to
maintain the cap may be terminated only with the approval of the Board of
Trustees.
14 The Fund's administrator has contractually agreed to waive or limit its fee
and to assume as its own expense certain expenses of the Fund so that
common annual Fund operating expenses (i.e., a combination of fund
administration fees and other expenses, but excluding Rule 12b-1 fees and
acquired fund fees and expenses) do not exceed 0.10% (other than certain
non-routine expenses or costs, including, but not limited to, those
relating to litigation, indemnification, reorganizations, and liquidations)
until April 30, 2013. The Fund does not pay management fees but will
directly bear its proportionate share of any management fees and other
expenses paid by the underlying funds (or "acquired funds") in which it
invests. Acquired funds' estimated fees and expenses are based on the
acquired funds' annualized expenses. The Fund is not available as an
investment option to Owners who purchase an Annuity on or after April 30,
2012. Owners who have purchased an Annuity prior to April 30, 2012 and have
invested in the Fund at any time since they have owned their Annuity, may
continue to allocate Purchase Payments to the Fund after this date,
including through Dollar Cost Averaging, Automatic Rebalancing, or
comparable programs. However, Owners should be aware that all monies that
they have invested in the Fund are scheduled to be transferred to the AST
Franklin Templeton Founding Funds Allocation Portfolio by way of a fund
substitution anticipated to take place in June 2012, pending the receipt of
the necessary regulatory approvals. Once the fund substitution is
completed, the Fund will no longer be available for investments by any
Owners.
15 Pyramis is a registered service mark of FMR LLC. Used under license.
15
EXPENSE EXAMPLES
These examples are intended to help you compare the cost of investing in the
Annuity with the cost of investing in other variable annuities. Below are
examples showing what you would pay in expenses at the end of the stated time
periods had you invested $10,000 in the Annuity and your investment has a 5%
return each year. The examples reflect the following fees and charges for the
Annuity as described in "Summary of Contract Fees and Charges":
. Insurance Charge
. Annual Maintenance Fee
. The maximum combination of optional benefit charges
The examples also assume the following for the period shown:
. You allocate all of your Account Value to the Sub-account with the
maximum gross total annual operating expenses for 2011, and those
expenses remain the same each year*
. For each charge, we deduct the maximum charge rather than the current
charge
. You make no withdrawals of Account Value
. You make no transfers, or other transactions for which we charge a fee
. No tax charge applies
. You elect the Highest Daily Lifetime 6 Plus with Combination 5% Roll-up
and HAV Death Benefit (which are the maximum combination of available
optional benefit charges)
Amounts shown in the examples are rounded to the nearest dollar.
* Note: Not all portfolios offered as Sub-accounts may be available depending
on optional benefit selection, the applicable jurisdiction and selling firm.
THE EXAMPLES ARE ILLUSTRATIVE ONLY - THEY SHOULD NOT BE CONSIDERED A
REPRESENTATION OF PAST OR FUTURE EXPENSES OF THE UNDERLYING MUTUAL FUNDS OR
THEIR PORTFOLIOS - ACTUAL EXPENSES WILL BE LESS THAN THOSE SHOWN DEPENDING
UPON WHICH OPTIONAL BENEFIT YOU ELECT OTHER THAN INDICATED IN THE EXAMPLES OR
IF YOU ALLOCATE ACCOUNT VALUE TO ANY OTHER AVAILABLE SUB-ACCOUNTS.
EXPENSE EXAMPLES ARE PROVIDED AS FOLLOWS:
If you surrender your annuity at the end of the applicable time period:
1 YEAR 3 YEARS 5 YEARS 10 YEARS
-----------------------------------
$539 $1,643 $2,783 $5,801
-----------------------------------
If you annuitize your annuity at the end of the applicable time period:
1 YEAR 3 YEARS 5 YEARS 10 YEARS
-----------------------------------
$539 $1,643 $2,783 $5,801
-----------------------------------
If you do not surrender your annuity:
1 YEAR 3 YEARS 5 YEARS 10 YEARS
-----------------------------------
$539 $1,643 $2,783 $5,801
-----------------------------------
For information relating to accumulation unit values pertaining to the
Sub-accounts please see Appendix A - Condensed Financial Information about
Separate Account B.
16
SUMMARY
Advisors Choice 2000 ("Choice 2000")
This Summary describes key features of the variable annuity described in this
Prospectus. It is intended to help give you an overview, and to point you to
sections of the Prospectus that provide greater detail. This Summary is
intended to supplement the prospectus, so you should not rely on the Summary
alone for all the information you need to know before purchase. You should
read the entire Prospectus for a complete description of the variable annuity.
Your financial advisor can also help you if you have questions.
WHAT IS A VARIABLE ANNUITY? A variable annuity is a contract between you and
an insurance company. It is designed to help you save money for retirement,
and to a provide income during your retirement. With the help of your
financial advisor, you choose how to invest your money within your annuity.
Any allocation that is recommended to you by your financial professional may
be different than automatic asset transfers that may be made under the
Annuity, such as under a pre-determined mathematical formula used with an
optional living benefit. The value of your annuity will rise or fall depending
on whether the investment options you choose perform well or perform poorly.
Investing in a variable annuity involves risk and you can lose your money. By
the same token, investing in a variable annuity can provide you with the
opportunity to grow your money through participation in mutual fund-type
investments. Your financial advisor will help you choose your investment
options based on your tolerance for risk and your needs.
Variable annuities also offer a variety of optional guarantees to receive an
income for life through withdrawal, or provide minimum death benefits for your
beneficiaries, or minimum account value guarantees. These benefits provide a
degree of insurance in the event your annuity performs poorly. These optional
benefits are available for an extra cost, and are subject to limitations and
conditions more fully described later in this Prospectus. The guarantees are
based on the long-term financial strength of the insurance company.
WHAT DOES IT MEAN THAT MY VARIABLE ANNUITY IS "TAX-DEFERRED"? Because variable
annuities are issued by an insurance company, you pay no taxes on any earnings
from your Annuity until you withdraw the money. You may also transfer among
your investment options without paying a tax at the time of the transfer.
Until you withdraw the money, tax deferral allows you to keep money invested
that would otherwise go to pay taxes. When you take your money out of the
variable annuity, however, you will be taxed on the earnings at ordinary
income tax rates rather than lower capital gains rates. If you withdraw
earnings before you reach age 59 1/2, you also may be subject to a 10% federal
tax penalty.
You could purchase the variable annuity as a tax-qualified retirement
investment such as an IRA, SEP-IRA, Roth IRA, 401(a) plan, or 403(b) plan.
Although there is no additional tax advantage to a variable annuity held
through one of these plans, you may desire the variable annuities' other
features such as guaranteed lifetime income payments or death benefits for use
within these plans.
HOW DO I PURCHASE THE VARIABLE ANNUITY? This Annuity is no longer available
for new purchases. This Annuity was designed for sale solely in connection
with investment advisory services provided by an Advisor. The minimum initial
purchase payment is $5,000.
For annuities purchased as a Beneficiary Annuity, the maximum issue age is 70
and applies to the Key Life. The availability and level of protection of
certain optional benefits may also vary based on the age of the owner or
annuitant on the issue date of the annuity, the date the benefit is elected,
or the date of the owner's death. Please see the section entitled "Living
Benefits" and "Death Benefit" for additional information on these benefits.
We may allow you to purchase an Annuity with an amount lower than the "Minimum
Initial Purchase Payment" if you establish an electronic funds transfer that
would allow you to meet the minimum requirement within one year.
You may make additional payments of at least $100 into your Annuity at any
time, subject to maximums allowed by us and as provided by law.
After you purchase your Annuity you will have usually ten days to examine it
and cancel it if you change your mind for any reason (referred to as the "free
look period"). The period of time and the amount returned to you is dictated
by State law, and is stated on the front cover of your contract. You must
cancel your Annuity in writing.
See "What Are the Requirements for Purchasing One of the Annuities?" for more
detail.
WHERE SHOULD I INVEST MY MONEY? With the help of your financial professional,
you choose where to invest your money within the Annuity. Certain optional
benefits may limit your ability to invest in the investment options otherwise
available to you under the Annuity. You may choose from a variety of
investment options ranging from conservative to aggressive. These investment
17
options participate in mutual fund investments that are kept in a separate
account from our other general assets. Although you may recognize some of the
names of the money managers, these investment options are designed for
variable annuities and are not the same mutual funds available to the general
public. You can decide on a mix of investment options that suit your goals.
Or, you can choose one of our investment options that participates in several
mutual funds according to a specified goal such as balanced asset allocation,
or capital growth asset allocation. Each of the underlying mutual funds is
described by its own prospectus, which you should read before investing. There
is no assurance that any investment option will meet its investment objective.
We also offer programs to help discipline your investing, such as dollar cost
averaging or automatic rebalancing.
See "Investment Options," and "Managing your Account Value."
HOW CAN I RECEIVE INCOME FROM MY ANNUITY? You can receive income by taking
withdrawals or electing annuity payments. If you take withdrawals, you should
plan them carefully, because withdrawals may be subject to tax. See the "Tax
Considerations" section of this Prospectus.
You may elect to receive income through annuity payments over your lifetime,
also called "annuitization". This option may appeal to those who worry about
outliving their Account Value through withdrawals. If you elect to receive
annuity payments, you convert your Account Value into a stream of future
payments. This means in most cases you no longer have an Account Value and
therefore cannot make withdrawals. We offer different types of annuity options
to meet your needs, and you can choose the benefits and costs that make sense
for you. For example, some of our annuity options allow for withdrawals, and
some provide a death benefit, while others guarantee payments for life without
a death benefit or the ability to make withdrawals.
See "Access to Account Value."
OPTIONS FOR GUARANTEED LIFETIME WITHDRAWALS. We offer optional benefits for an
additional fee that guarantee your ability to take withdrawals for life as a
percentage of an initial guaranteed benefit base, even after your Account
Value falls to zero. The Account Value has no guarantees, may fluctuate, and
can lose value. These benefits may appeal to you if you wish to maintain
flexibility and control over your Account Value (instead of converting it to
an annuity stream) and want the assurance of predictable income. If you
withdraw more than the allowable amount during any year, your future level of
guaranteed withdrawals decreases.
As part of these benefits you are required to invest only in certain permitted
investment options. Some of the benefits utilize a predetermined mathematical
formula to help manage your guarantee through all market cycles. Please see
applicable optional benefits section as for more information. In the Living
Benefits section, we describe these guaranteed minimum withdrawal benefits,
which allow you to withdraw a specified amount each year for life (or joint
lives, for the spousal version of the benefit). Please be aware that if you
withdraw more than that amount in a given year (i.e., excess income), that may
permanently reduce the guaranteed amount you can withdraw in future years.
Thus, you should think carefully before taking such excess income. If you
purchased your contract in New York and wish to withdraw excess income but are
uncertain how it will impact your future guaranteed amounts, you may contact
us prior to requesting the withdrawal to obtain a personalized,
transaction-specific calculation showing the effect of taking the withdrawal.
These benefits contain detailed provisions, so please see the following
sections of the Prospectus for complete details:
.. Highest Daily Lifetime 6 Plus
.. Highest Daily Lifetime 6 Plus with Lifetime Accelerator
.. Spousal Highest Daily Lifetime 6 Plus
.. Highest Daily Lifetime 7 Plus*
.. Spousal Highest Daily Lifetime 7 Plus*
.. Highest Daily Lifetime 7 Plus with Lifetime Income Accelerator*
.. Highest Daily Lifetime 7 Plus with Beneficiary Income Option*
.. Spousal Highest Daily Lifetime 7 Plus with Beneficiary Income Option*
.. Highest Daily Lifetime Seven*
.. Spousal Highest Daily Lifetime Seven*
.. Highest Daily Lifetime Seven with Lifetime Income Accelerator*
.. Highest Daily Lifetime Seven with Beneficiary Income Option*
.. Spousal Highest Daily Lifetime Seven with Beneficiary Income Option*
* No longer available for new elections.
OPTIONS FOR GUARANTEED ACCUMULATION. We offer optional benefits for an
additional fee that guarantee your Account Value to a certain level after a
period of years. As part of these benefits you are required to invest only in
certain permitted investment options. Please see applicable optional benefits
sections for more information.
These benefits contain detailed provisions, so please see the following
sections of the prospectus for complete details:
.. Guaranteed Return Option Plus II
.. Highest Daily Guaranteed Return Option II
.. Guaranteed Return Option Plus 2008*
18
.. Guaranteed Return Option Plus (GRO Plus)*
.. Guaranteed Return Option (GRO)*
.. Highest Daily Guaranteed Return Option*
* No longer available for new elections
There are other optional living and death benefits that we previously offered,
but are not currently available. See the applicable section of this Prospectus
for details.
WHAT HAPPENS TO MY ANNUITY UPON DEATH? You may name a beneficiary to receive
the proceeds of your annuity upon your death. Your annuity must be distributed
within the time periods required by the tax laws. The annuity offers a basic
death benefit. In general, the basic death benefit provides your beneficiaries
with the greater of your purchase payments less all proportional withdrawals
or your value in the annuity at the time of death.
We also offer optional death benefits for an additional charge:
.. HIGHEST ANNIVERSARY VALUE DEATH BENEFIT: Offers the greater of the basic
death benefit and a highest anniversary value of the annuity.
.. COMBINATION 5% ROLL-UP AND HIGHEST ANNIVERSARY VALUE DEATH BENEFIT: Offers
the greatest of the basic death benefit, the highest anniversary value
death benefit described above, and a value assuming 5% growth of your
investment adjusted for withdrawals.
Each death benefit has certain age restrictions. Please see the "Death
Benefit" section of the Prospectus for more information.
WHAT ARE THE ANNUITY'S FEES AND CHARGES? There is no contingent deferred sales
charge applied if you surrender your Annuity or make a partial withdrawal.
TRANSFER FEE: You may make 20 transfers between investment options each year
free of charge. After the 20th transfer, we will charge $10.00 for each
transfer. We do not consider transfers made as part of any Dollar Cost
Averaging, Automatic Rebalancing or asset allocation program when we count the
twenty free transfers. All transfers made on the same day will be treated as
one (1) transfer. Any transfers made as a result of the mathematical formula
used with an optional benefit will not count towards the total transfers
allowed.
ANNUAL MAINTENANCE FEE: Until you start annuity payments, we deduct an Annual
Maintenance Fee. The Annual Maintenance Fee is the lesser of $35.00 or 2% of
your Account Value. The Annual Maintenance Fee is only deducted if your
Account Value is less than $50,000.
TAX CHARGE: We may deduct a charge to reimburse us for taxes we may pay on
premiums received in certain jurisdictions. The tax charge currently ranges up
to 3 1/2% of your Purchase Payments and is designed to approximate the taxes
that we are required to pay.
INSURANCE CHARGE: We deduct an Insurance Charge daily. It is the combination
of the Mortality & Expense Risk Charge and the Administration Charge. The
charge is assessed against the daily assets allocated to the Sub-accounts and
is equal to 0.65% annually.
CHARGES FOR OPTIONAL BENEFITS: If you elect to purchase certain optional
benefits, we will deduct an additional charge. For some optional benefits, the
charge is deducted from your Account Value allocated to the Sub-accounts. This
charge is included in the daily calculation of the Unit Price for each
Sub-account. For certain other optional benefits, such as Highest Daily
Lifetime Seven, the charge is assessed against the Protected Withdrawal Value
and taken out of the Sub-accounts periodically. Please refer to the section
entitled "Summary of Contract Fees and Charges" for the list of charges for
each optional benefit.
SETTLEMENT SERVICE CHARGE: If your beneficiary takes the death benefit under a
Beneficiary Continuation Option, we deduct a Settlement Service Charge,
although the Insurance Charge no longer applies. The charge is assessed daily
against the average assets allocated to the Sub-accounts and is equal to an
annual charge of 1.00% for non-qualified Annuities and 1.40% for qualified
Annuities.
FEES AND EXPENSES INCURRED BY THE PORTFOLIOS: Each Portfolio incurs total
annual operating expenses comprised of an investment management fee, other
expenses and any distribution and service (12b-1) fees that may apply. More
detailed information about fees and expenses can be found in the prospectuses
for the Portfolios. Please see the "Fees and Charges" section of the
Prospectus for more information.
COSTS TO SELL AND ADMINISTER OUR VARIABLE ANNUITY: Your financial professional
may receive a commission for selling one of our variable annuities to you. We
may pay fees to your financial professional's broker dealer firm to cover
costs of marketing or administration. These commissions and fees may incent
your financial advisor to sell our variable annuity instead of one offered by
another company. We also receive fees from the mutual fund companies that
offer the investment options for administrative costs and marketing. These
fees may influence our decision to offer one family of funds over another. If
you have any questions you may speak with your financial professional or us.
See "General Information".
OTHER INFORMATION: Please see the section entitled "General Information" for
more information about our annuities, including legal information about our
company, separate account, and underlying fund.
19
INVESTMENT OPTIONS
WHAT ARE THE INVESTMENT OBJECTIVES AND POLICIES OF THE PORTFOLIOS?
Each variable investment option is a Sub-account of Prudential Annuities Life
Assurance Corporation Variable Account B (see "What are Separate Accounts" for
more detailed information). Each Sub-account invests exclusively in one
Portfolio. You should carefully read the prospectus for any Portfolio in which
you are interested. The Investment Objectives Policies chart below classifies
each of the Portfolios based on our assessment of their investment style (as
of the date of this Prospectus). The chart also provides a description of each
Portfolio's investment objective (in italics) and a short, summary description
of their key policies to assist you in determining which Portfolios may be of
interest to you. There is no guarantee that any underlying Portfolio will meet
its investment objective. Not all portfolios offered as Sub-accounts may be
available depending on optional benefit selection, the applicable jurisdiction
and selling firm. The Portfolios that you select are your choice - we do not
provide investment advice and we do not recommend or endorse any particular
Portfolio. You bear the investment risk for amounts allocated to the
Portfolios. Please see the General Information section of this Prospectus,
under the heading concerning "service fees" for a discussion of fees that we
may receive from underlying mutual funds and /or their affiliates.
The name of the advisor/sub-advisor for each Portfolio appears next to the
description. Those Portfolios whose name includes the prefix "AST" are
Portfolios of Advanced Series Trust. The investment managers for AST are AST
Investment Services, Inc., a Prudential Financial Company and Prudential
Investments LLC, both of which are affiliated companies of Prudential
Annuities. However, a sub-advisor, as noted below, is engaged to conduct
day-to-day management.
The Portfolios are not publicly traded mutual funds. They are only available
as investment options in variable annuity contracts and variable life
insurance policies issued by insurance companies, or in some cases, to
participants in certain qualified retirement plans. However, some of the
Portfolios available as Sub-accounts under the Annuity are managed by the same
portfolio advisor or sub-advisor as a retail mutual fund of the same or
similar name that the Portfolio may have been modeled after at its inception.
Certain retail mutual funds may also have been modeled after a Portfolio.
While the investment objective and policies of the retail mutual funds and the
Portfolios may be substantially similar, the actual investments will differ to
varying degrees. Differences in the performance of the funds can be expected,
and in some cases could be substantial. You should not compare the performance
of a publicly traded mutual fund with the performance of any similarly named
Portfolio offered as a Sub-account. Details about the investment objectives,
policies, risks, costs and management of the Portfolios are found in the
prospectuses for the underlying mutual funds. The current prospectus and
statement of additional information for the underlying Portfolios can be
obtained by calling 1-888-PRU-2888.
Effective March 16, 2001, the Nova, Inverse S&P 500 Strategy (f/k/a Inverse
S&P 500) and NASDAQ-100(R) (f/k/a OTC) portfolios of Rydex Variable Trust are
no longer offered as Sub-accounts under the Annuity. Owners of Annuities
issued on or after March 16, 2001 will not be allowed to allocate Account
Value to the Rydex Nova, Rydex Inverse S&P 500 Strategy or Rydex NASDAQ-100(R)
Sub-accounts. Except as noted below, Owners of Annuities issued before
March 16, 2001, and/or their authorized investment professionals, will no
longer be able to allocate additional Account Value or make transfers into the
Rydex Nova, Rydex Inverse S&P 500 Strategy or Rydex NASDAQ-100(R)
Sub-accounts. Annuity Owners and/or their authorized Financial Professionals
who elect to transfer Account Value out of the Rydex Sub-accounts on or after
March 16, 2001 will not be allowed to transfer Account Value into the Rydex
Sub-accounts at a later date. Electronic funds transfer, dollar cost
averaging, asset allocation and rebalancing programs that were effective
before March 16, 2001 and included one or more of the Rydex Sub-accounts will
be allowed to continue. However, no changes involving the Rydex Sub-accounts
may be made to such programs.
Effective May 1, 2004, the SP William Blair International Growth Portfolio
(formerly the SP Jennison International Growth Portfolio) is no longer offered
as a Sub-account under the Annuity, except as follows: if at any time prior to
May 1, 2004 you had any portion of your Account Value allocated to the SP
William Blair International Growth Sub-account, you may continue to allocate
Account Value and make transfers into and/or out of the SP William Blair
International Growth Sub-account, including any electronic funds transfer,
dollar cost averaging, asset allocation and rebalancing programs. If you never
had a portion of your Account Value allocated to the SP William Blair
International Growth Sub-account prior to May 1, 2004 or if you purchase your
Annuity on or after May 1, 2004, you cannot allocate Account Value to the SP
William Blair International Growth Sub-Account.
Effective February 27, 2012, the Value Line(R) Target 25 Portfolio is no
longer offered as a Sub-account under the Annuities, except as follows: if at
any time prior to February 27, 2012 you had any portion of your Account Value
allocated to the Value Line(R) Target 25 Sub-account, you may continue to
allocate Account Value and make transfers into and/or out of the Value Line(R)
Target 25 Sub-account, including any electronic funds transfer, dollar cost
averaging, asset allocation, rebalancing and Balanced Investment programs. If
you never had a portion of your Account Value allocated to the Value Line(R)
Target 25 Sub-account prior to February 27, 2012, you cannot allocate Account
Value to the Value Line(R) Target 25 Sub-account.
STIPULATED INVESTMENT OPTIONS IF YOU ELECT CERTAIN OPTIONAL BENEFITS
As a condition to your participating in certain optional benefits, we limit
the investment options to which you may allocate your Account Value. Broadly
speaking, we offer two groups of "Permitted Sub-accounts". Under the first
group (Group I), your
20
allowable investment options are more limited, but you are not subject to
mandatory quarterly re-balancing. Under the second group (Group II), you may
allocate your Account Value between a broader range of investment options, but
must participate in quarterly re-balancing. The set of tables immediately
below describes the first category of permitted investment options.
While those who do not participate in any optional benefit generally may
invest in any of the investment options described in the Prospectus, only
those who participate in the optional benefits listed in Group II below may
participate in the second category (along with its attendant re-balancing
requirement). This second category is called our Custom Portfolios Program (we
may have referred to the "Custom Portfolios Program" as the "Optional
Allocation and Rebalancing Program" in other materials). If you participate in
the Custom Portfolios Program, you may not participate in an Automatic
Rebalancing Program. We may modify or terminate the Custom Portfolios Program
at any time. ANY SUCH MODIFICATION OR TERMINATION WILL (I) BE IMPLEMENTED ONLY
AFTER WE HAVE NOTIFIED YOU IN ADVANCE, (II) NOT AFFECT THE GUARANTEES YOU HAD
ACCRUED UNDER THE OPTIONAL BENEFIT OR YOUR ABILITY TO CONTINUE TO PARTICIPATE
IN THOSE OPTIONAL BENEFITS, AND (III) NOT REQUIRE YOU TO TRANSFER ACCOUNT
VALUE OUT OF ANY PORTFOLIO IN WHICH YOU PARTICIPATED IMMEDIATELY PRIOR TO THE
MODIFICATION OR TERMINATION.
Group I: Allowable Benefit Allocations
OPTIONAL BENEFIT NAME* ALLOWABLE BENEFIT ALLOCATIONS:
Lifetime Five Income Benefit AST Academic Strategies Asset
Spousal Lifetime Five Income Benefit Allocation Portfolio
Highest Daily Lifetime Five Income AST Advanced Strategies Portfolio
Benefit AST Balanced Asset Allocation
Highest Daily Lifetime Seven Income Portfolio
Benefit AST BlackRock Global Strategies
Spousal Highest Daily Lifetime Seven Portfolio
Income Benefit AST Capital Growth Asset Allocation
Highest Daily Value Death Benefit Portfolio
Highest Daily Lifetime Seven with AST CLS Moderate Asset Allocation
Beneficiary Income Option Portfolio
Spousal Highest Daily Lifetime Seven AST FI Pyramis(R) Asset Allocation
with Beneficiary Income Option Portfolio
Highest Daily Lifetime Seven with AST First Trust Balanced Target
Lifetime Income Accelerator Portfolio
Highest Daily Lifetime 7 Plus Income AST First Trust Capital Appreciation
Benefit Target Portfolio
Highest Daily Lifetime 7 Plus with AST Franklin Templeton Founding
Beneficiary Income Option Funds Allocation Portfolio
Highest Daily Lifetime 7 Plus with AST Horizon Growth Asset Allocation
Lifetime Income Accelerator Portfolio
Spousal Highest Daily Lifetime 7 AST Horizon Moderate Asset
Plus Income Benefit Allocation Portfolio
Spousal Highest Daily Lifetime 7 AST J.P. Morgan Strategic
Plus with Beneficiary Opportunities Portfolio
Income Option AST New Discovery Asset Allocation
Highest Daily Lifetime 6 Plus Portfolio
Highest Daily Lifetime 6 Plus with AST Preservation Asset Allocation
Lifetime Income Accelerator Portfolio
Spousal Highest Daily Lifetime 6 Plus AST Schroders Global Tactical
Highest Daily GRO II Portfolio
GRO Plus II AST Schroders Multi-Asset World
Strategies Portfolio
AST T. Rowe Price Asset Allocation
Portfolio
AST Wellington Management Hedged
Equity Portfolio
Franklin Templeton VIP Founding
Funds Allocation Fund
------------------------------------------------------------------------------
OPTIONAL BENEFIT NAME* ALL INVESTMENT OPTIONS PERMITTED,
EXCEPT THESE:
Combo 5% Rollup & HAV Death Benefit **Value Line(R) Target 25
Guaranteed Minimum Income Benefit Invesco V.I. Technology
Guaranteed Minimum Withdrawal Benefit NASDAQ(R) Target 15
GRO/GRO PLUS/GRO PLUS 2008 Access VP High Yield
Highest Anniversary Value Death ProFund VP UltraNASDAQ 100
Benefit ProFund VP UltraSmall-Cap
Highest Daily GRO ProFund VP Semiconductor
ProFund VP Internet
ProFund VP UltraBull
ProFund VP Technology
ProFund VP Biotechnology
ProFund VP Short Small-Cap
ProFund VP Short Mid-Cap
Wells Fargo Advantage VT Small-Cap
Growth
------------------------------------------------------------------------------
21
OPTIONAL BENEFIT NAME* ALL INVESTMENT OPTIONS PERMITTED,
EXCEPT THESE:
GRO PLUS 2008 ProFund VP Ultra Mid-Cap
Highest Daily GRO ProFund VP Precious Metals
ProFund VP NASDAQ-100
ProFund VP Asia 30
ProFund VP Short NASDAQ-100
**Value Line(R) Target 25
Invesco V.I. Technology
NASDAQ(R) Target 15
Access VP High Yield
ProFund VP UltraNASDAQ 100
ProFund VP UltraSmall-Cap
ProFund VP Semiconductor
ProFund VP Internet
ProFund VP UltraBull
ProFund VP Technology
ProFund VP Biotechnology
ProFund VP Short Small-Cap
ProFund VP Short Mid-Cap
Wells Fargo Advantage VT Small-Cap
Growth
-----------------------------------------------------------------------------
* Detailed Information regarding these optional benefits can be found in the
"Living Benefits" and "Death Benefit" sections of this Prospectus.
** No longer offered.
The following set of tables describes the second category (i.e., Group II
below), under which:
(a)you must allocate at least 20% of your Account Value to certain fixed
income portfolios (currently, the AST PIMCO Total Return Bond Portfolio,
the AST Western Asset Core Plus Bond Portfolio, the AST Lord Abbett Core
Fixed Income Portfolio, the AST Neuberger Core Bond Portfolio, and the AST
Prudential Core Bond Portfolio).
(b)you may allocate up to 80% in equity and other portfolios listed in the
table below.
(c)on each benefit quarter (or the next Valuation Day, if the quarter-end is
not a Valuation Day), we will automatically re-balance your Account Value,
so that the percentages devoted to each Portfolio remain the same as those
in effect on the immediately preceding quarter-end, subject to the
predetermined mathematical formula inherent in any applicable optional
benefit. Note that on the first quarter-end following your participation in
the Custom Portfolios Program (we may have referred to the "Custom
Portfolios Program" as the "Optional Allocation and Rebalancing Program" in
other materials), we will re-balance your Account Value so that the
percentages devoted to each Portfolio remain the same as those in effect
when you began the Custom Portfolios Program.
(d)between quarter-ends, you may re-allocate your Account Value among the
investment options permitted within this category. If you reallocate, the
next quarterly rebalancing will restore the percentages to those of your
most recent reallocation.
(e)if you are already participating in the Custom Portfolios Program (we may
have referred to the "Custom Portfolios Program" as the "Optional
Allocation and Rebalancing Program" in other materials) and add a new
benefit that also participates in this program, your rebalancing date will
continue to be based upon the quarterly anniversary of your initial benefit
election.
Group II: Custom Portfolios Program (we may have referred to the "Custom
Portfolios Program" as the "Optional Allocation and Rebalancing Program" in
other materials)
OPTIONAL BENEFIT NAME PERMITTED PORTFOLIOS
Highest Daily Lifetime Seven AST Academic Strategies Asset
Spousal Highest Daily Lifetime Seven Allocation
Highest Daily Lifetime Seven with AST Advanced Strategies
Beneficiary Income Option Spousal AST Balanced Asset Allocation
Highest Daily Lifetime Seven with AST CLS Growth Asset Allocation
Beneficiary Income Option AST CLS Moderate Asset Allocation
Highest Daily Lifetime Seven with AST AllianceBernstein Core Value
Lifetime Income Accelerator AST American Century Income & Growth
Highest Daily Lifetime 7 Plus AST Capital Growth Asset Allocation
Spousal Highest Daily Lifetime 7 Plus AST Cohen & Steers Realty
Highest Daily Lifetime 7 Plus with AST BlackRock Global Strategies
Beneficiary Income Option AST BlackRock Value
Spousal Highest Daily Lifetime 7 AST Federated Aggressive Growth
Plus with Beneficiary Income Option AST FI Pyramis(R) Asset Allocation
Highest Daily Lifetime 7 Plus with AST First Trust Balanced Target
Lifetime Income Accelerator AST First Trust Capital Appreciation
Highest Daily Lifetime 6 Plus Target
Highest Daily Lifetime 6 Plus with AST Franklin Templeton Founding
Lifetime Income Accelerator Funds Allocation
Spousal Highest Daily Lifetime 6 Plus AST Global Real Estate
22
OPTIONAL BENEFIT NAME PERMITTED PORTFOLIOS
GRO Plus II AST Goldman Sachs Concentrated Growth
Highest Daily GRO II AST Goldman Sachs Large-Cap Value
AST Goldman Sachs Mid-Cap Growth
AST Goldman Sachs Small-Cap Value
AST High Yield
AST Horizon Growth Asset Allocation
AST Horizon Moderate Asset Allocation
AST International Growth
AST International Value
AST JPMorgan International Equity
AST J.P. Morgan Strategic
Opportunities
AST Jennison Large-Cap Growth
AST Jennison Large-Cap Value
AST Large-Cap Value
AST Lord Abbett Core Fixed Income
AST Marsico Capital Growth
AST MFS Global Equity
AST MFS Growth
AST Mid-Cap Value
AST Money Market
AST Neuberger Berman Core Bond
AST Neuberger Berman Mid-Cap Growth
AST Neuberger Berman/LSV Mid-Cap
Value
AST Parametric Emerging Markets
Equity
AST PIMCO Limited Maturity Bond
AST PIMCO Total Return Bond
AST Preservation Asset Allocation
AST Prudential Core Bond
AST QMA US Equity Alpha
AST Schroders Global Tactical
AST Schroders Multi-Asset World
Strategies
AST Small-Cap Growth
AST Small-Cap Value
AST T. Rowe Price Asset Allocation
AST T. Rowe Price Equity Income
AST T. Rowe Price Global Bond
AST T. Rowe Price Large-Cap Growth
AST T. Rowe Price Natural Resources
AST Wellington Management Hedged
Equity
AST Western Asset Core Plus Bond
Franklin Templeton VIP Founding
Funds Allocation Fund
PROFUND VP**
Consumer Goods
Consumer Services
Financials
Health Care
Industrials
Large-Cap Growth
Large-Cap Value
Mid-Cap Growth
Mid-Cap Value
Real Estate
Small-Cap Growth
Small-Cap Value
Telecommunications
Utilities
* Detailed Information regarding these optional benefits can be found in the
"Living Benefits" and "Death Benefit" sections of this Prospectus.
Certain optional living benefits (e.g., Highest Daily Lifetime 7 Plus) employ
a predetermined formula, under which money is transferred between your chosen
variable sub-accounts and a bond portfolio (e.g., the AST Investment Grade
Bond Portfolio). You
23
should be aware that the operation of the formulas may result in large-scale
asset flows into and out of your chosen Sub-accounts and the AST Investment
Grade Bond Portfolio, which could subject those portfolios to certain risks
and adversely impact their expenses and performance. Even if you do not elect
an optional living benefit that employs a predetermined mathematical formula,
the expenses, performance, and risk profile of your investment may be
adversely impacted as described below to the extent you select Permitted
Sub-accounts. The mathematical formulas may adversely affect a portfolio's
investment performance by requiring the sub-advisor to purchase and sell
securities at inopportune times and by otherwise limiting the sub-advisor's
ability to fully implement that portfolio's investment strategies. Because
transfers to and from your chosen Sub-accounts and the AST Investment Grade
Bond Portfolio can be frequent and the amount transferred can vary, any of
these portfolios could experience the following additional effects, among
others:
(a)the sub-advisor may be required to hold a larger portion of assets in
highly liquid securities than it otherwise would, which could diminish
performance if the highly liquid securities underperform other securities
(e.g., equities) that otherwise would have been held;
(b)a portfolio may experience higher turnover, which could result in higher
operating expense ratios and transaction costs for the portfolio compared
to other similar funds; and,
(c)if the sub-advisor must sell securities that are thinly-traded to satisfy
redemption requests initiated pursuant to the formula, such sales could
have a significant adverse impact on the price of such securities and the
cash proceeds received by the portfolio.
Please consult the prospectus for the applicable portfolio for additional
information about these effects.
24
STYLE/ INVESTMENT OBJECTIVES/POLICIES PORTFOLIO
TYPE ADVISOR/
SUBADVISOR
-----------------------------------------------------------------------
ADVANCED SERIES TRUST
-----------------------------------------------------------------------
ASSET AST ACADEMIC STRATEGIES ASSET AlphaSimplex
ALLOCA ALLOCATION PORTFOLIO: seeks long Group, LLC; AQR
TION term capital appreciation. The Capital
Portfolio is a multi-asset class Management, LLC
fund that pursues both top-down and CNH Partners,
asset allocation strategies and LLC;
bottom-up selection of securities, CoreCommodity
investment managers, and mutual Management, LLC;
funds. Under normal circumstances, First Quadrant,
approximately 60% of the assets will L.P.; Jennison
be allocated to traditional asset Associates LLC;
classes (including US and J.P. Morgan
international equities and bonds) Investment
and approximately 40% of the assets Management, Inc.;
will be allocated to nontraditional Pacific Investment
asset classes and strategies Management
(including real estate, commodities, Company LLC
and alternative strategies). Those (PIMCO);
percentages are subject to change at Prudential
the discretion of the advisor. Investments LLC;
Quantitative
Management
Associates LLC
-----------------------------------------------------------------------
ASSET AST ADVANCED STRATEGIES PORTFOLIO: LSV Asset
ALLOCA seeks a high level of absolute Management;
TION return by using traditional and Marsico Capital
non-traditional investment Management, LLC;
strategies and by investing in Pacific Investment
domestic and foreign equity and Management
fixed-income securities, derivative Company LLC
instruments and other investment (PIMCO);
companies. The Portfolio uses Quantitative
traditional and non-traditional Management
investment strategies by investing Associates LLC;
in domestic and foreign equity and T. Rowe Price
fixed-income securities, derivative Associates, Inc.;
instruments and other investment William Blair &
companies. The asset allocation Company, LLC
generally provides for an allotment
of 60% of the portfolio's assets to
a combination of domestic and
international equity strategies and
the remaining 40% of assets in a
combination of U.S. fixed income,
hedged international bond, real
return assets and other investment
companies. Quantitative Management
Associates LLC allocates the assets
of the portfolio across different
investment categories and
subadvisors.
-----------------------------------------------------------------------
ASSET AST BALANCED ASSET ALLOCATION Prudential
ALLOCA PORTFOLIO: seeks to obtain the Investments LLC;
TION highest potential total return Quantitative
consistent with its specified level Management
of risk. The Portfolio primarily Associates LLC
invests its assets in a diversified
portfolio of other mutual funds,
within the Advanced Series Trust and
certain affiliated money market
funds. Under normal market
conditions, the Portfolio will
devote approximately 60% of its net
assets to underlying portfolios
investing primarily in equity
securities (with a range of 52.5% to
67.5%), and 40% of its net assets to
underlying portfolios investing
primarily in debt securities and
money market instruments (with a
range of 32.5% to 47.5%). The
Portfolio is not limited to
investing exclusively in shares of
the underlying portfolios and may
invest in securities, exchange
traded funds (ETFs), and futures
contracts, swap agreements and other
financial and derivative instruments.
-----------------------------------------------------------------------
ASSET AST BLACKROCK GLOBAL STRATEGIES BlackRock
ALLOCA PORTFOLIO: seeks a high total return Financial
TION consistent with a moderate level of Management, Inc.
risk. The Portfolio is a global,
multi asset-class portfolio that
invests directly in, among other
things, equity and equity-related
securities, investment grade debt
securities (including, without
limitation, U.S. Treasuries and U.S.
government securities),
non-investment grade bonds (also
known as "high yield bonds" or "junk
bonds"), real estate investment
trusts (REITs), exchange traded
funds (ETFs), and derivative
instruments, including
commodity-linked derivative
instruments.
-----------------------------------------------------------------------
25
STYLE/ INVESTMENT OBJECTIVES/POLICIES PORTFOLIO
TYPE ADVISOR/
SUBADVISOR
---------------------------------------------------------------------
LARGE CAP AST BLACKROCK VALUE PORTFOLIO: seeks BlackRock
VALUE maximum growth of capital by Investment
investing primarily in the value Management, LLC
stocks of larger companies. The
Portfolio pursues its objective,
under normal market conditions, by
investing at least 80% of the value
of its assets in the equity
securities of large-sized companies
included in the Russell 1000(R)
Value Index. The subadvisor employs
an investment strategy designed to
maintain a portfolio of equity
securities which approximates the
market risk of those stocks included
in the Russell 1000(R) Value Index,
but which attempts to outperform the
Russell 1000(R) Value Index through
active stock selection.
---------------------------------------------------------------------
FIXED AST BOND PORTFOLIO 2015: seeks the Prudential
INCOME highest total return for a specific Investment
period of time, consistent with the Management, Inc.
preservation of capital and
liquidity needs. Total return is
comprised of current income and
capital appreciation. Under normal
market conditions, the Portfolio
invests at least 80% of its
investable assets in bonds. The
Portfolio is designed to meet the
parameters established to support
certain living benefits for variable
annuities that mature on
December 31, 2015. Please note that
you may not make purchase payments
to this Portfolio, and that this
Portfolio is available only with
certain living benefits.
---------------------------------------------------------------------
FIXED AST BOND PORTFOLIO 2016: seeks the Prudential
INCOME highest total return for a specific Investment
period of time, consistent with the Management, Inc.
preservation of capital and
liquidity needs. Total return is
comprised of current income and
capital appreciation. Under normal
market conditions, the Portfolio
invests at least 80% of its
investable assets in bonds. The
Portfolio is designed to meet the
parameters established to support
certain living benefits for variable
annuities that mature on
December 31, 2016. Please note that
you may not make purchase payments
to this Portfolio, and that this
Portfolio is available only with
certain living benefits.
---------------------------------------------------------------------
FIXED AST BOND PORTFOLIO 2017: seeks the Prudential
INCOME highest total return for a specific Investment
period of time, consistent with the Management, Inc.
preservation of capital and
liquidity needs. Total return is
comprised of current income and
capital appreciation. Under normal
market conditions, the Portfolio
invests at least 80% of its
investable assets in bonds. The
Portfolio is designed to meet the
parameters established to support
certain living benefits for variable
annuities that mature on
December 31, 2017. Please note that
you may not make purchase payments
to this Portfolio, and that this
Portfolio is available only with
certain living benefits.
---------------------------------------------------------------------
FIXED AST BOND PORTFOLIO 2018: seeks the Prudential
INCOME highest total return for a specific Investment
period of time, consistent with the Management, Inc.
preservation of capital and
liquidity needs. Total return is
comprised of current income and
capital appreciation. Under normal
market conditions, the Portfolio
invests at least 80% of its
investable assets in bonds. The
Portfolio is designed to meet the
parameters established to support
certain living benefits for variable
annuities that mature on
December 31, 2018. Please note that
you may not make purchase payments
to this Portfolio, and that this
Portfolio is available only with
certain living benefits.
---------------------------------------------------------------------
FIXED AST BOND PORTFOLIO 2019: seeks the Prudential
INCOME highest total return for a specific Investment
period of time, consistent with the Management, Inc.
preservation of capital and
liquidity needs. Total return is
comprised of current income and
capital appreciation. Under normal
market conditions, the Portfolio
invests at least 80% of its
investable assets in bonds. The
Portfolio is designed to meet the
parameters established to support
certain living benefits for variable
annuities that mature on
December 31, 2019. Please note that
you may not make purchase payments
to this Portfolio, and that this
Portfolio is available only with
certain living benefits.
---------------------------------------------------------------------
FIXED AST BOND PORTFOLIO 2020: seeks the Prudential
INCOME highest total return for a specific Investment
period of time, consistent with the Management, Inc.
preservation of capital and
liquidity needs. Total return is
comprised of current income and
capital appreciation. Under normal
market conditions, the Portfolio
invests at least 80% of its
investable assets in bonds. The
Portfolio is designed to meet the
parameters established to support
certain living benefits for variable
annuities that mature on
December 31, 2020. Please note that
you may not make purchase payments
to this Portfolio, and that this
Portfolio is available only with
certain living benefits.
---------------------------------------------------------------------
FIXED AST BOND PORTFOLIO 2021: seeks the Prudential
INCOME highest total return for a specific Investment
period of time, consistent with the Management, Inc.
preservation of capital and
liquidity needs. Total return is
comprised of current income and
capital appreciation. Under normal
market conditions, the Portfolio
invests at least 80% of its
investable assets in bonds. The
Portfolio is designed to meet the
parameters established to support
certain living benefits for variable
annuities that mature on
December 31, 2021. Please note that
you may not make purchase payments
to this Portfolio, and that this
Portfolio is available only with
certain living benefits.
---------------------------------------------------------------------
26
STYLE/ INVESTMENT OBJECTIVES/POLICIES PORTFOLIO
TYPE ADVISOR/
SUBADVISOR
----------------------------------------------------------------------
FIXED AST BOND PORTFOLIO 2022: seeks the Prudential
INCOME highest total return for a specific Investment
period of time, consistent with the Management, Inc.
preservation of capital and
liquidity needs. Total return is
comprised of current income and
capital appreciation. Under normal
market conditions, the Portfolio
invests at least 80% of its
investable assets in bonds. The
Portfolio is designed to meet the
parameters established to support
certain living benefits for variable
annuities that mature on
December 31, 2022. Please note that
you may not make purchase payments
to this Portfolio, and that this
Portfolio is available only with
certain living benefits.
----------------------------------------------------------------------
FIXED AST BOND PORTFOLIO 2023: seeks the Prudential
INCOME highest total return for a specific Investment
period of time, consistent with the Management, Inc.
preservation of capital and
liquidity needs. Total return is
comprised of current income and
capital appreciation. Under normal
market conditions, the Portfolio
invests at least 80% of its
investable assets in bonds. The
Portfolio is designed to meet the
parameters established to support
certain living benefits for variable
annuities that mature on
December 31, 2023. Please note that
you may not make purchase payments
to this Portfolio, and that this
Portfolio is available only with
certain living benefits.
----------------------------------------------------------------------
ASSET AST CAPITAL GROWTH ASSET ALLOCATION Prudential
ALLOCA- PORTFOLIO: seeks to obtain a total Investments LLC;
TION return consistent with its specified Quantitative
level of risk. The Portfolio Management
primarily invests its assets in a Associates LLC
diversified portfolio of other
mutual funds, within the Advanced
Series Trust and certain affiliated
money market funds. Under normal
market conditions, the Portfolio
will devote approximately 75% of its
net assets to underlying portfolios
investing primarily in equity
securities (with a range of 67.5% to
80%), and 25% of its net assets to
underlying portfolios investing
primarily in debt securities and
money market instruments (with a
range of 20.0% to 32.5%). The
Portfolio is not limited to
investing exclusively in shares of
the underlying portfolios and may
invest in securities, exchange
traded funds (ETFs), and futures
contracts, swap agreements and other
financial and derivative instruments.
----------------------------------------------------------------------
ASSET AST CLS MODERATE ASSET ALLOCATION CLS Investments,
ALLOCA- PORTFOLIO: seeks the highest LLC
TION potential total return consistent
with its specified level of risk
tolerance. Under normal
circumstances, at least 90% of the
Portfolio's assets will be invested
in other portfolios of Advanced
Series Trust (the underlying
portfolios) while no more than 10%
of the Portfolio's assets may be
invested in exchange traded funds
(ETFs). Under normal market
conditions, the Portfolio will
invest approximately 50% of its net
assets to equity securities and
approximately 50% of its net assets
to debt securities and money market
instruments. The equity portion may
range from 40% to 60% of net assets
to underlying portfolios and ETFs
investing primarily in equity
securities, and from 40% to 60% of
net assets to underlying portfolios
and ETFs investing primarily in
money market instruments and debt
securities, which may include
non-investment grade bonds.
"Non-investment grade bonds" are
commonly referred to as "junk bonds".
----------------------------------------------------------------------
SPECIALTY AST COHEN & STEERS REALTY PORTFOLIO: Cohen & Steers
seeks to maximize total return Capital
through investment in real estate Management, Inc.
securities. The Portfolio pursues
its investment objective by
investing, under normal
circumstances, at least 80% of its
net assets in securities issued by
companies associated with the real
estate industry, such as real estate
investment trusts (REITs). Under
normal circumstances, the Portfolio
will invest substantially all of its
assets in the equity securities of
real estate related issuers, i.e., a
company that derives at least 50% of
its revenues from the ownership,
construction, financing, management
or sale of real estate or that has
at least 50% of its assets in real
estate.
----------------------------------------------------------------------
SMALL CAP AST FEDERATED AGGRESSIVE GROWTH Federated Equity
GROWTH PORTFOLIO: seeks capital growth. The Management
Portfolio pursues its investment Company of
objective by investing primarily in Pennsylvania/
the stocks of small companies that Federated Global
are traded on national security Investment
exchanges, NASDAQ stock exchange and Management Corp.
the over- the-counter-market. Small
companies are defined as companies
with market capitalizations similar
to companies in the Russell 2000
Index and S&P 600 Small Cap Index.
----------------------------------------------------------------------
ASSET AST FI PYRAMIS(R) ASSET ALLOCATION Pyramis Global
ALLOCA- PORTFOLIO: seeks to maximize total Advisors, LLC a
TION return. In seeking to achieve the Fidelity
Portfolio's investment objective, Investments
the Portfolio's assets are allocated Company
across eight uniquely specialized
investment strategies. The Portfolio
has five strategies that invest
primarily in equity securities, two
fixed-income strategies (the Broad
Market Duration Strategy and the
High Yield Bond Strategy), and one
strategy designed to provide
liquidity (the Liquidity Strategy).
----------------------------------------------------------------------
Pyramis is a registered service mark of FMR LLC. Used under license.
27
STYLE/ INVESTMENT OBJECTIVES/POLICIES PORTFOLIO
TYPE ADVISOR/
SUBADVISOR
-------------------------------------------------------------------------
ASSET AST FIRST TRUST BALANCED TARGET First Trust Advisors
ALLOCA- PORTFOLIO: seeks long-term capital L.P.
TION growth balanced by current income.
The Portfolio seeks to achieve its
objective by investing approximately
65% of its net assets in equity
securities and approximately 35% of
its net assets in fixed- income
securities as of the annual security
selection date. Depending on market
conditions, the equity portion may
range between 60-70% of the
Portfolio's net assets and the
fixed-income portion may range
between 30-40% of the Portfolio's
net assets. The revised allocations
do not take into account the
potential investment of up to 5% of
the Portfolio's assets in the
"liquidity" investment sleeve. In
seeking to achieve its investment
objective, the Portfolio allocates
its assets across multiple uniquely
specialized investment strategies.
On or about the annual selection
date (currently March 1 under normal
circumstances), the Portfolio
establishes both the percentage
allocations among the various
investment strategies under normal
circumstances and the percentage
allocation of each security's
position within each of the
investment strategies that invest
primarily in equity securities.
-------------------------------------------------------------------------
ASSET AST FIRST TRUST CAPITAL APPRECIATION First Trust Advisors
ALLOCA- TARGET PORTFOLIO: seeks long-term L.P.
TION capital growth. The Portfolio seeks
to achieve its objective by
investing approximately 80% of its
net assets in equity securities and
approximately 20% of its net assets
in fixed-income securities as of the
annual security selection date.
Depending on market conditions, the
equity portion may range between
75-85% of the Portfolio's net assets
and the fixed- income portion may
range between 15-25% of the
Portfolio's net assets. The revised
allocations do not take into account
the potential investment of up to 5%
of the Portfolio's assets in the
"liquidity" investment sleeve. In
seeking to achieve its investment
objective, the Portfolio allocates
its assets across multiple uniquely
specialized investment strategies.
On or about the annual selection
date (currently March 1 under normal
circumstances), the Portfolio
establishes both the percentage
allocations among the various
investment strategies under normal
circumstances and the percentage
allocation of each security's
position within each of the
investment strategies that invest
primarily in equity securities.
-------------------------------------------------------------------------
ASSET AST FRANKLIN TEMPLETON FOUNDING Franklin Advisers,
ALLOCA- FUNDS ALLOCATION PORTFOLIO: seeks Inc.; Franklin
TION capital appreciation while its Mutual Advisers,
secondary investment objective will LLC; Templeton
be to seek income. Under normal Global Advisors
market conditions the Portfolio will Limited
seek to achieve its investment
objectives by allocating 33 1/3% of
its assets to each of the
Portfolio's three subadvisors. The
Portfolio will normally invest in a
combination of domestic and foreign
equity and fixed-income and money
market securities. Depending upon
the Portfolio's ability to achieve
the necessary asset scale, the
Trust's ability to implement certain
legal agreements and custody
arrangements, and market, economic,
and financial conditions as of the
Portfolio's commencement of
operations, it may take several
weeks for the Portfolio's assets to
be fully invested in accordance with
its investment objective and
policies. During that time, it is
anticipated that all or a portion of
the Portfolio's assets will be
invested in high grade, short term
debt securities (both fixed and
floating rate), money market funds,
short-term bond funds,
exchange-traded funds, and/or index
futures contracts. A relatively long
initial investment period may
negatively affect the Portfolio's
investment return and ability to
achieve its investment objective.
-------------------------------------------------------------------------
SPECIALTY AST GLOBAL REAL ESTATE PORTFOLIO: Prudential Real
seeks capital appreciation and Estate Investors
income. The Portfolio will normally
invest at least 80% of its
investable assets (net assets plus
any borrowing made for investment
purposes) in equity-related
securities of real estate companies.
The Portfolio will invest in
equity-related securities of real
estate companies on a global basis
and the Portfolio may invest up to
15% of its net assets in ownership
interests in commercial real estate
through investments in private real
estate.
-------------------------------------------------------------------------
LARGE CAP AST GOLDMAN SACHS CONCENTRATED Goldman Sachs
GROWTH GROWTH PORTFOLIO: seeks long-term Asset Management,
growth of capital. The Portfolio L.P.
will pursue its objective by
investing primarily in equity
securities of companies that the
subadvisor believes have the
potential to achieve capital
appreciation over the long-term. The
Portfolio seeks to achieve its
investment objective by investing,
under normal circumstances, in
approximately 30 - 45 companies that
are considered by the subadvisor to
be positioned for long-term growth.
-------------------------------------------------------------------------
28
STYLE/ INVESTMENT OBJECTIVES/POLICIES PORTFOLIO
TYPE ADVISOR/
SUBADVISOR
------------------------------------------------------------------------
LARGE CAP AST GOLDMAN SACHS LARGE-CAP VALUE Goldman Sachs
VALUE PORTFOLIO: seeks long-term growth of Asset Management,
capital. The Portfolio seeks to L.P.
achieve its investment objective by
investing in value opportunities
that the subadvisor, defines as
companies with identifiable
competitive advantages whose
intrinsic value is not reflected in
the stock price. The Portfolio
invests, under normal circumstances,
at least 80% of its net assets in a
diversified portfolio of equity
investments in large-cap U.S.
issuers with public stock market
capitalizations within the range of
the market capitalization of
companies in the Russell 1000 Value
Index at the time of investment.
------------------------------------------------------------------------
MID CAP AST GOLDMAN SACHS MID-CAP GROWTH Goldman Sachs
GROWTH PORTFOLIO: seeks long-term growth of Asset Management,
capital. The Portfolio pursues its L.P.
investment objective, by investing
primarily in equity securities
selected for their growth potential,
and normally invests at least 80% of
the value of its assets in
medium-sized companies. Medium-sized
companies are those whose market
capitalizations (measured at the
time of investment) fall within the
range of companies in the Russell
Mid Cap Growth Index. The subadvisor
seeks to identify individual
companies with earnings growth
potential that may not be recognized
by the market at large.
------------------------------------------------------------------------
SMALL CAP AST GOLDMAN SACHS SMALL-CAP VALUE Goldman Sachs
VALUE PORTFOLIO: seeks long-term capital Asset Management,
appreciation. The Portfolio will L.P.
seek its objective through
investments primarily in equity
securities that are believed to be
undervalued in the marketplace. The
Portfolio will invest, under normal
circumstances, at least 80% of the
value of its assets in small
capitalization companies. The
Portfolio generally defines small
capitalization companies as
companies with market
capitalizations that are within the
range of the Russell 2000 Value
Index at the time of purchase.
------------------------------------------------------------------------
FIXED AST HIGH YIELD PORTFOLIO: seeks J.P. Morgan
INCOME maximum total return, consistent Investment
with preservation of capital and Management, Inc.;
prudent investment management. The Prudential
Portfolio will invest, under normal Investment
circumstances, at least 80% of its Management, Inc.
net assets plus any borrowings for
investment purposes (measured at
time of purchase) in non-investment
grade high yield (also known as
"junk bonds") fixed-income
investments which may be represented
by forwards or derivatives such as
options, futures contracts, or swap
agreements. Non-investment grade
investments are securities rated Ba
or lower by Moody's Investors
Services, Inc. or equivalently rated
by Standard & Poor's Corporation, or
Fitch, or, if unrated, determined by
the subadvisor to be of comparable
quality.
------------------------------------------------------------------------
ASSET AST HORIZON GROWTH ASSET ALLOCATION Horizon
ALLOCA- PORTFOLIO: seeks the highest Investments, LLC
TION potential total return consistent
with its specified level of risk
tolerance. Under normal
circumstances, at least 90% of the
Portfolio's assets will be invested
in other portfolios of Advanced
Series Trust (the underlying
portfolios) while no more than 10%
of the Portfolio's assets may be
invested in exchange traded funds
(ETFs). Under normal market
conditions, the Portfolio will
devote from 60% to 80% of its net
assets to underlying portfolios and
ETFs investing primarily in equity
securities, and from 20% to 40% of
its net assets to underlying
portfolios and ETFs investing
primarily in debt securities and
money market instruments.
------------------------------------------------------------------------
ASSET AST HORIZON MODERATE ASSET Horizon
ALLOCA ALLOCATION PORTFOLIO: seeks the Investments, LLC
TION highest potential total return
consistent with its specified level
of risk tolerance. Under normal
circumstances, at least 90% of the
Portfolio's assets will be invested
in other portfolios of Advanced
Series Trust (the underlying
portfolios) while no more than 10%
of the Portfolio's assets may be
invested in exchange traded funds
(ETFs). Under normal market
conditions, the Portfolio will
devote from 40% to 60% of its net
assets to underlying portfolios and
ETFs investing primarily in equity
securities, and from 40% to 60% of
its net assets to underlying
portfolios and ETFs investing
primarily in debt securities and
money market instruments.
------------------------------------------------------------------------
INTER AST INTERNATIONAL GROWTH PORTFOLIO: Jennison Associates
NATIONAL seeks long-term capital growth. LLC; Marsico
EQUITY Under normal circumstances, the Capital
Portfolio invests at least 80% of Management, LLC;
the value of its assets in William Blair &
securities of issuers that are Company, LLC
economically tied to countries other
than the United States. Although the
Portfolio intends to invest at least
80% of its assets in the securities
of issuers located outside the
United States, it may at times
invest in U.S. issuers and it may
invest all of its assets in fewer
than five countries or even a single
country. The Portfolio looks
primarily for stocks of companies
whose earnings are growing at a
faster rate than other companies or
which offer attractive growth.
------------------------------------------------------------------------
29
STYLE/ INVESTMENT OBJECTIVES/POLICIES PORTFOLIO
TYPE ADVISOR/
SUBADVISOR
------------------------------------------------------------------------
INTER AST INTERNATIONAL VALUE PORTFOLIO: LSV Asset
NATIONAL seeks capital growth. The Portfolio Management;
EQUITY normally invests at least 80% of the Thornburg
Portfolio's investable assets in Investment
equity securities. The Portfolio Management, Inc.
will invest at least 65% of its net
assets in the equity securities of
companies in at least three
different countries, without limit
as to the amount of assets that may
be invested in a single country.
------------------------------------------------------------------------
FIXED AST INVESTMENT GRADE BOND PORTFOLIO: Prudential
INCOME seeks to maximize total return, Investment
consistent with the preservation of Management, Inc.
capital and liquidity needs. Under
normal market conditions the
Portfolio invests at least 80% of
its investable assets in bonds.
Please note that you may not make
purchase payments to this Portfolio,
and that this Portfolio is available
only with certain living benefits.
------------------------------------------------------------------------
LARGE CAP AST JENNISON LARGE-CAP GROWTH Jennison Associates
GROWTH PORTFOLIO: seeks long-term growth of LLC
capital. Under normal market
conditions, the Portfolio will
invest at least 80% of its
investable assets in the equity and
equity-related securities of
large-capitalization companies
measured, at the time of purchase,
to be within the market
capitalization of the Russell
1000(R) Index. In deciding which
equity securities to buy, the
subadvisor will use a growth
investment style and will invest in
stocks it believes could experience
superior sales or earnings growth,
or high returns on equity and
assets. Stocks are selected on a
company-by-company basis using
fundamental analysis. The companies
in which the subadvisor will invest
generally tend to have a unique
market niche, a strong new product
profile or superior management.
------------------------------------------------------------------------
LARGE CAP AST JENNISON LARGE-CAP VALUE Jennison Associates
VALUE PORTFOLIO: seeks capital LLC
appreciation. Under normal market
conditions, the Portfolio will
invest at least 80% of its
investable assets in the equity and
equity-related securities of
large-capitalization companies
measured, at the time of purchase,
to be within the market
capitalization of the Russell
1000(R) Index. In deciding which
equity securities to buy, the
subadvisor will use a value
investment style and will invest in
common stocks that it believes are
being valued at a discount to their
intrinsic value, as defined by the
value of their earnings, free cash
flow, the value of their assets,
their private market value, or some
combination of these factors.
------------------------------------------------------------------------
INTER AST JPMORGAN INTERNATIONAL EQUITY J.P. Morgan
NATIONAL PORTFOLIO: seeks capital growth. The Investment
EQUITY Portfolio seeks to meet its Management, Inc.
objective by investing, under normal
market conditions, at least 80% of
its assets in equity securities. The
Portfolio seeks to meet its
investment objective by normally
investing primarily in a diversified
portfolio of equity securities of
companies located or operating in
developed non-U.S. countries and
emerging markets of the world. The
equity securities will ordinarily be
traded on a recognized foreign
securities exchange or traded in a
foreign over-the-counter market in
the country where the issuer is
principally based, but may also be
traded in other countries including
the United States.
------------------------------------------------------------------------
ASSET AST JPMORGAN STRATEGIC OPPORTUNITIES J.P. Morgan
ALLOCA- PORTFOLIO: seeks to maximize return Investment
TION compared to the benchmark through Management, Inc.
security selection and tactical
asset allocation. The Portfolio
invests in securities and financial
instruments (including derivatives)
to gain exposure to global equity,
global fixed income and cash
equivalent markets, including global
currencies. The Portfolio may invest
in developed and emerging markets
securities, domestic and foreign
fixed income securities (including
non-investment grade bonds or "junk
bonds"), and real estate investment
trusts (REITs) of issuers located
within and outside the United States
or in open-end investment companies
advised by J.P. Morgan Investment
Management, Inc., the Portfolio's
subadvisor, to gain exposure to
certain global equity and global
fixed income markets.
------------------------------------------------------------------------
LARGE CAP AST LARGE-CAP VALUE PORTFOLIO: seeks Eaton Vance
VALUE current income and long-term growth Management;
of income, as well as capital Hotchkis and Wiley
appreciation. The Portfolio invests, Capital
under normal circumstances, at least Management, LLC
80% of its net assets in securities
of large capitalization companies.
Large capitalization companies are
those companies with market
capitalizations within the market
capitalization range of the Russell
1000 Value Index.
------------------------------------------------------------------------
30
STYLE/ INVESTMENT OBJECTIVES/POLICIES PORTFOLIO
TYPE ADVISOR/
SUBADVISOR
-----------------------------------------------------------------------
FIXED AST LORD ABBETT CORE-FIXED INCOME Lord, Abbett & Co.
INCOME PORTFOLIO: seeks income and capital LLC
appreciation to produce a high total
return. Under normal market
conditions, the Portfolio pursues
its investment objective by
investing at least 80% of its net
assets in fixed-income securities.
The Portfolio primarily invests in
securities issued or guaranteed by
the U.S. government, its agencies or
government-sponsored enterprises;
investment grade debt securities of
U.S. issuers; investment grade debt
securities of non-U.S. issuers that
are denominated in U.S. dollars;
mortgage-backed and other
asset-backed securities; senior
loans, and loan participations and
assignments; and derivative
instruments, such as options,
futures contracts, forward contracts
and swap agreements.
-----------------------------------------------------------------------
LARGE CAP AST MARSICO CAPITAL GROWTH Marsico Capital
GROWTH PORTFOLIO: seeks capital growth. Management, LLC
Income realization is not an
investment objective and any income
realized on the Portfolio's
investments, therefore, will be
incidental to the Portfolio's
objective. The Portfolio will pursue
its objective by investing primarily
in common stocks of large companies
that are selected for their growth
potential. Large capitalization
companies are companies with market
capitalizations within the market
capitalization range of the Russell
1000 Growth Index. In selecting
investments for the Portfolio, the
subadvisor uses an approach that
combines "top down" macroeconomic
analysis with "bottom up" stock
selection. The "top down" approach
identifies sectors, industries and
companies that may benefit from the
trends the subadvisor has observed.
The subadvisor then looks for
individual companies that are
expected to offer earnings growth
potential that may not be recognized
by the market at large, utilizing a
"bottom up" stock selection process.
The Portfolio will normally hold a
core position of between 35 and 50
common stocks. The Portfolio may
hold a limited number of additional
common stocks at times when the
portfolio manager is accumulating
new positions, phasing out and
replacing existing positions or
responding to exceptional market
conditions.
-----------------------------------------------------------------------
INTER AST MFS GLOBAL EQUITY PORTFOLIO: Massachusetts
NATIONAL seeks capital growth. Under normal Financial Services
EQUITY circumstances the Portfolio invests Company
at least 80% of its net assets in
equity securities. The Portfolio may
invest in the securities of U.S. and
foreign issuers (including issuers
in emerging market countries). While
the portfolio may invest its assets
in companies of any size, the
Portfolio generally focuses on
companies with relatively large
market capitalizations.
-----------------------------------------------------------------------
LARGE CAP AST MFS GROWTH PORTFOLIO: seeks Massachusetts
GROWTH long-term capital growth and future, Financial Services
rather than current income. Under Company
normal market conditions, the
Portfolio invests at least 80% of
its net assets in common stocks and
related securities, such as
preferred stocks, convertible
securities and depositary receipts.
The subadvisor focuses on investing
the Portfolio's assets in the stocks
of companies it believes to have
above-average earnings growth
potential compared to other
companies. The subadvisor uses a
"bottom up" as opposed to a "top
down" investment style in managing
the Portfolio.
-----------------------------------------------------------------------
MID CAP AST MID-CAP VALUE PORTFOLIO: seeks EARNEST
VALUE to provide capital growth by Partners, LLC;
investing primarily in WEDGE Capital
mid-capitalization stocks that Management L.L.P.
appear to be undervalued. The
Portfolio invests, under normal
circumstances, at least 80% of the
value of its net assets in
mid-capitalization companies.
Mid-capitalization companies are
generally those that have market
capitalizations, at the time of
purchase, within the market
capitalization range of companies
included in the Russell Midcap(R)
Value Index during the previous 12
months based on month-end data.
-----------------------------------------------------------------------
FIXED AST MONEY MARKET PORTFOLIO: seeks Prudential
INCOME high current income and maintain Investment
high levels of liquidity. The Management, Inc.
Portfolio invests in high-quality
money market instruments and seeks
to maintain a stable net asset value
(NAV) of $1 per share.
-----------------------------------------------------------------------
FIXED AST NEUBERGER BERMAN CORE BOND Neuberger Berman
INCOME PORTFOLIO: seeks to maximize total Fixed Income LLC
return consistent with the
preservation of capital. Under
normal circumstances the Portfolio
invests at least 80% of its
investable assets in bonds and other
debt securities. All of the debt
securities in which the Portfolio
invests will be investment grade
under normal circumstances.
-----------------------------------------------------------------------
31
STYLE/ INVESTMENT OBJECTIVES/POLICIES PORTFOLIO
TYPE ADVISOR/
SUBADVISOR
------------------------------------------------------------------------
MID CAP AST NEUBERGER BERMAN MID-CAP GROWTH Neuberger Berman
GROWTH PORTFOLIO: seeks capital growth. Management LLC
Under normal market conditions, the
Portfolio invests at least 80% of
its net assets in the common stocks
of mid-capitalization companies.
Mid-capitalization companies are
those companies whose market
capitalization is within the range
of market capitalizations of
companies in the Russell Midcap(R)
Growth Index. Using fundamental
research and quantitative analysis,
the subadvisor looks for
fast-growing companies with
above-average sales and competitive
returns on equity relative to their
peers.
------------------------------------------------------------------------
MID CAP AST NEUBERGER BERMAN/LSV MID-CAP LSV Asset
VALUE VALUE PORTFOLIO: seeks capital Management;
growth. Under normal market Neuberger Berman
conditions, the Portfolio invests at Management LLC
least 80% of its net assets in the
common stocks of medium
capitalization companies. Companies
with market capitalizations that
fall within the range of the Russell
Midcap(R) Value Index at the time of
investment are considered medium
capitalization companies. Some of
the Portfolio's assets may be
invested in the securities of
large-cap companies as well as in
small-cap companies.
------------------------------------------------------------------------
ASSET AST NEW DISCOVERY ASSET ALLOCATION Bradford & Marzec,
ALLOCA- PORTFOLIO (formerly AST American LLC; Brown
TION Century Income & Growth Portfolio): Advisory, LLC;
seeks total return. Total return is C.S. McKee, LP;
comprised of capital appreciation EARNEST
and income. Under normal Partners, LLC;
circumstances, approximately 70% of Epoch Investment
the Portfolio's assets will be Partners, Inc.;
allocated to a combination of Security Investors,
domestic and international equity LLC; Thompson,
strategies and approximately 30% of Siegel & Walmsley
Portfolio's assets will be allocated LLC
to certain U.S. fixed-income
investment strategies and a
liquidity strategy. Depending upon
the Portfolio's ability to achieve
the necessary asset scale, the
Trust's ability to implement certain
legal agreements and custody
arrangements, and market, economic,
and financial conditions as of the
Portfolio's commencement of
operations, it may take several
weeks for the Portfolio's assets to
be fully invested in accordance with
its investment objective and
policies. During that time, it is
anticipated that all or a portion of
the Portfolio's assets will be
invested in high grade, short term
debt securities (both fixed and
floating rate), money market funds,
short-term bond funds,
exchange-traded funds, and/or index
futures contracts. A relatively long
initial investment period may
negatively affect the Portfolio's
investment return and ability to
achieve its investment objective.
------------------------------------------------------------------------
INTER AST PARAMETRIC EMERGING MARKETS Parametric Portfolio
NATIONAL EQUITY PORTFOLIO: seeks long-term Associates LLC
EQUITY capital appreciation. The Portfolio
normally invests at least 80% of its
net assets in equity securities of
issuers (i) located in emerging
market countries, which are
generally those not considered to be
developed market countries, or (ii)
included (or considered for
inclusion) as emerging markets
issuers in one or more broad-based
market indices. Emerging market
countries are generally countries
not considered to be developed
market countries, and therefore not
included in the MSCI World Index.
The Portfolio seeks to employ a
top-down, disciplined and structured
investment process that emphasizes
broad exposure and diversification
among emerging market countries,
economic sectors and issuers.
------------------------------------------------------------------------
FIXED AST PIMCO LIMITED MATURITY BOND Pacific Investment
INCOME PORTFOLIO: seeks to maximize total Management
return consistent with preservation Company LLC
of capital and prudent investment (PIMCO)
management. The Portfolio will
invest, under normal circumstances,
at least 80% of the value of its net
assets in fixed- income investments,
which may be represented by forwards
or derivatives such as options,
futures contracts, or swap
agreements. The average portfolio
duration normally varies within a
one-to-three year time-frame based
on the subadvisor's forecast of
interest rates. Portfolio holdings
are concentrated in areas of the
bond market (based on quality,
sector, interest rate or maturity)
that the subadvisor believes to be
relatively undervalued. The
Portfolio may invest up to 10% total
assets in non-investment grade bonds
which are commonly known as "junk
bonds".
------------------------------------------------------------------------
32
STYLE/ INVESTMENT OBJECTIVES/POLICIES PORTFOLIO
TYPE ADVISOR/
SUBADVISOR
------------------------------------------------------------------------
FIXED AST PIMCO TOTAL RETURN BOND Pacific Investment
INCOME PORTFOLIO: seeks to maximize total Management
return consistent with preservation Company LLC
of capital and prudent investment (PIMCO)
management. The Portfolio will
invest, under normal circumstances,
at least 80% of the value of its net
assets in fixed income investments,
which may be represented by forwards
or derivatives such as options,
futures contracts, or swap
agreements. The average portfolio
duration normally varies within two
years (+/-) of the duration of the
Barclay's Capital U.S. Aggregate
Bond Index. Portfolio holdings are
concentrated in areas of the bond
market (based on quality, sector,
interest rate or maturity) that the
subadvisor believes to be relatively
undervalued. The Portfolio may
invest up to 10% total assets in
non-investment grade bonds which are
commonly known as "junk bonds".
------------------------------------------------------------------------
ASSET AST PRESERVATION ASSET ALLOCATION Prudential
ALLOCA- PORTFOLIO: seeks to obtain a total Investments LLC;
TION return consistent with its specified Quantitative
level of risk. The Portfolio Management
primarily invests its assets in a Associates LLC
diversified portfolio of other
mutual funds, within the Advanced
Series Trust and certain affiliated
money market funds. Under normal
market conditions, the Portfolio
will devote approximately 35% of its
net assets to underlying portfolios
investing primarily in equity
securities (with a range of 27.5% to
42.5%), and 65% of its net assets to
underlying portfolios investing
primarily in debt securities and
money market instruments (with a
range of 57.5% to 72.5%). The
Portfolio is not limited to
investing exclusively in shares of
the underlying portfolios and may
invest in securities, exchange
traded funds (ETFs), and futures
contracts, swap agreements and other
financial and derivative instruments.
------------------------------------------------------------------------
FIXED AST PRUDENTIAL CORE BOND PORTFOLIO: Prudential
INCOME seeks to maximize total return Investment
consistent with the long-term Management, Inc.
preservation of capital. The
Portfolio will invest, under normal
circumstances, at least 80% of its
net assets in intermediate and
long-term debt obligations and high
quality money market instruments.
The Portfolio will invest, under
normal circumstances, at least 80%
of its net assets in intermediate
and long-term debt obligations that
are rated investment grade by the
major ratings services, or if
unrated, considered to be of
comparable quality by the
subadvisor, and high quality money
market instruments. Likewise, the
Portfolio may invest up to 20% of
its net assets in
high-yield/high-risk debt securities
(commonly known as "junk bonds").
The Portfolio also may invest up to
20% of its total assets in debt
securities issued outside the U.S.
by U.S. or foreign issuers, whether
or not such securities are
denominated in the U.S. dollar.
------------------------------------------------------------------------
LARGE CAP AST QMA US EQUITY ALPHA PORTFOLIO: Quantitative
BLEND seeks long term capital Management
appreciation. The portfolio utilizes Associates LLC
a long/short investment strategy and
will normally invest at least 80% of
its net assets plus borrowings in
equity and equity related securities
of US issuers. The Portfolio seeks
to produce returns that exceed those
of its benchmark index, the Russell
1000(R), which is comprised of
stocks representing more than 90% of
the market cap of the US market and
includes the largest 1000 securities
in the Russell 3000(R) Index.
------------------------------------------------------------------------
ASSET AST QUANTITATIVE MODELING PORTFOLIO: Quantitative
ALLOCA- seeks a high potential return while Management
TION attempting to mitigate downside risk Associates LLC
during adverse market cycles. The
Portfolio operates as a
"fund-of-funds", meaning that the
Portfolio invests substantially all
of its assets in a combination of
other mutual funds. The assets of
the Portfolio are allocated to a
capital growth segment and a
fixed-income segment. Under normal
circumstances, approximately 75% of
the Portfolio's net assets
attributable to the capital growth
segment are invested in underlying
portfolios that invest primarily in
equity securities, while the
remaining 25% of the Portfolio's net
assets attributable to the capital
growth segment are invested in
underlying portfolios that invest
primarily in debt securities and
money market instruments. All of the
assets attributable to the
fixed-income segment are invested in
the AST Investment Grade Bond
Portfolio, which in turn invests at
least 80% of its assets in bonds.
Portfolio assets are normally
transferred between the capital
growth segment and the fixed-income
segment based upon the application
of a quantitative model to the
Portfolio's overall net asset value
(NAV) per share. In general terms,
the model seeks to transfer
Portfolio assets from the capital
growth segment to the fixed-income
segment when the Portfolio's NAV per
share experiences certain declines
and from the fixed- income segment
to the capital growth segment when
the Portfolio's NAV per share
experiences certain increases or
remains flat over certain periods of
time.
------------------------------------------------------------------------
33
STYLE/ INVESTMENT OBJECTIVES/POLICIES PORTFOLIO
TYPE ADVISOR/
SUBADVISOR
------------------------------------------------------------------------
ASSET AST SCHRODERS MULTI-ASSET WORLD Schroder
ALLOCA- STRATEGIES PORTFOLIO: seeks Investment
TION long-term capital appreciation. The Management North
Portfolio seeks to achieve its America Inc./
objective through a flexible global Schroder
asset allocation approach. This Investment
approach entails investing in Management North
traditional asset classes, such as America Ltd.
equity and fixed-income investments,
and alternative asset classes, such
as investments in real estate,
commodities, currencies, private
equity, non-investment grade bonds,
Emerging Market Debt and absolute
return strategies. The subadvisors
seek to emphasize the management of
risk and volatility. Exposure to
different asset classes and
investment strategies will vary over
time based upon the subadvisor's
assessments of changing market,
economic, financial and political
factors and events.
------------------------------------------------------------------------
ASSET AST SCHRODERS GLOBAL TACTICAL Schroder
ALLOCA PORTFOLIO (formerly AST CLS Growth Investment
TION Asset Allocation Portfolio): seeks Management North
to outperform its blended America Inc./
performance benchmark. The blended Schroder
benchmark is comprised of 45% Investment
Russell 3000, 12.5% MSCI EAFE (USD Management North
Hedged), 12.5% MSCI EAFE (Local), America Ltd.
and 30% Barclays Capital U.S.
Aggregate Bond Index. The Portfolio
is a multi asset-class fund that
allocates its assets among various
regions and countries throughout the
world, including the United States
(but in no less than three
countries). The subadvisors use
various investment strategies,
currency hedging, and a global
tactical asset allocation strategy
in order to help the Portfolio
achieve its investment objective.
Under normal circumstances,
approximately 70% of the Portfolio's
net assets are invested to provide
exposure to equity securities and
approximately 30% of its net assets
are invested to provide exposure to
fixed-income securities. Depending
on market conditions, such equity
exposure may range between 60-80% of
the Portfolio's net assets and such
fixed-income exposure may range
between 20-40% of its net assets.
------------------------------------------------------------------------
SMALL CAP AST SMALL-CAP GROWTH PORTFOLIO: Eagle Asset
GROWTH seeks long-term capital growth. The Management, Inc.;
Portfolio pursues its objective by Emerald Mutual
investing, under normal Fund Advisers
circumstances, at least 80% of the Trust
value of its assets in
small-capitalization companies.
Small-capitalization companies are
those companies with a market
capitalization, at the time of
purchase, no larger than the largest
capitalized company included in the
Russell 2000(R) Growth Index at the
time of the Portfolio's investment.
------------------------------------------------------------------------
SMALL CAP AST SMALL-CAP VALUE PORTFOLIO: seeks ClearBridge
VALUE to provide long-term capital growth Advisors, LLC; J.P.
by investing primarily in Morgan Investment
small-capitalization stocks that Management, Inc.;
appear to be undervalued. The Lee Munder Capital
Portfolio invests, under normal Group, LLC
circumstances, at least 80% of the
value of its net assets in small
capitalization stocks. Small
capitalization stocks are the stocks
of companies with market
capitalization that are within the
market capitalization range of the
Russell 2000(R) Value Index at the
time of purchase. Each subadvisor
expects to utilize different
investment strategies to achieve the
Portfolio's objective.
------------------------------------------------------------------------
ASSET AST T. ROWE PRICE ASSET ALLOCATION T. Rowe Price
ALLOCA PORTFOLIO: seeks a high level of Associates, Inc.
TION total return by investing primarily
in a diversified portfolio of equity
and fixed income securities. The
Portfolio normally invests
approximately 60% of its total
assets in equity securities and 40%
in fixed income securities. This mix
may vary over shorter time periods:
the equity portion may range between
50-70% and the fixed-income potion
may range between 30-50%. The
subadvisor concentrates common stock
investments in larger, more
established companies, but the
Portfolio may include small and
medium-sized companies with good
growth prospects. The fixed income
portion of the Portfolio will be
allocated among investment grade
securities, high yield or "junk"
bonds, emerging market securities,
foreign high quality debt securities
and cash reserves.
------------------------------------------------------------------------
34
STYLE/ INVESTMENT OBJECTIVES/POLICIES PORTFOLIO
TYPE ADVISOR/
SUBADVISOR
-----------------------------------------------------------------------
LARGE CAP AST T. ROWE PRICE EQUITY INCOME T. Rowe Price
VALUE PORTFOLIO (formerly AST Associates, Inc.
AllianceBernstein Core Value
Portfolio): seeks substantial
dividend income as well as long-term
growth of capital through
investments in the common stocks of
established companies. The Portfolio
will normally invest at least 80% of
its net assets (including any
borrowings for investment purposes)
in common stocks, with 65% of net
assets (including any borrowings for
investment purposes) in
dividend-paying common stocks of
well-established companies. The
Portfolio will typically employ a
"value" approach in selecting
investments. T. Rowe Price's
research team will seek companies
that appear to be undervalued by
various measures and may be
temporarily out of favor but have
good prospects for capital
appreciation and dividend growth. In
selecting investments, T. Rowe Price
generally will look for companies in
the aggregate with an established
operating history, above-average
dividend yield relative to the S&P
500 Index, low price/earnings ratio
relative to the S&P 500 Index, a
sound balance sheet and other
positive financial characteristics,
and low stock price relative to a
company's underlying value as
measured by assets, cash flow, or
business franchises.
-----------------------------------------------------------------------
FIXED AST T. ROWE PRICE GLOBAL BOND T. Rowe Price
INCOME PORTFOLIO: seeks to provide high Associates, Inc. /
current income and capital growth by T. Rowe Price
investing in high-quality foreign International Ltd
and U.S. dollar-denominated bonds. (TRPIL)
The Portfolio will normally invest
at least 80% of its total assets in
fixed income securities. The
Portfolio invests in all types of
bonds, including those issued or
guaranteed by U.S. or foreign
governments or their agencies and by
foreign authorities, provinces and
municipalities as well as investment
grade corporate bonds,
mortgage-related and asset- backed
securities, and high-yield bonds of
U.S. and foreign issuers. The
Portfolio generally invests in
countries where the combination of
fixed-income returns and currency
exchange rates appears attractive,
or, if the currency trend is
unfavorable, where the subadvisor
believes that the currency risk can
be minimized through hedging. The
Portfolio may also invest in
convertible securities, commercial
paper and bank debt and loan
participations. The Portfolio may
invest up to 20% of its assets in
the aggregate in below
investment-grade, high-risk bonds
("junk bonds") and emerging market
bonds. In addition, the Portfolio
may invest up to 30% of its assets
in mortgage-related (including
mortgage dollar rolls and
derivatives, such as collateralized
mortgage obligations and stripped
mortgage securities) and
asset-backed securities. The
Portfolio may invest in futures,
swaps and other derivatives in
keeping with its objective.
-----------------------------------------------------------------------
LARGE CAP AST T. ROWE PRICE LARGE-CAP GROWTH T. Rowe Price
GROWTH PORTFOLIO: seeks long-term growth of Associates, Inc.
capital by investing predominantly
in the equity securities of a
limited number of large, carefully
selected, high-quality U.S.
companies that are judged likely to
achieve superior earnings growth.
The Portfolio takes a growth
approach to investment selection and
normally invests at least 80% of its
net assets in the common stocks of
large companies. Large companies are
defined as those whose market
capitalization is larger than the
median market capitalization of
companies in the Russell 1000 Growth
Index as of the time of purchase.
-----------------------------------------------------------------------
SPECIALTY AST T. ROWE PRICE NATURAL RESOURCES T. Rowe Price
PORTFOLIO: seeks long-term capital Associates, Inc.
growth primarily through investing
in the common stocks of companies
that own or develop natural
resources (such as energy products,
precious metals and forest products)
and other basic commodities. The
Portfolio invests, under normal
circumstances, at least 80% of the
value of its assets in natural
resource companies. The Portfolio
may also invest in non-resource
companies with the potential for
growth. The Portfolio looks for
companies that have the ability to
expand production, to maintain
superior exploration programs and
production facilities, and the
potential to accumulate new
resources. Although the Portfolio is
primarily invested in U.S.
securities, up to 50% of total
assets also may be invested in
foreign securities.
-----------------------------------------------------------------------
35
STYLE/ INVESTMENT OBJECTIVES/POLICIES PORTFOLIO
TYPE ADVISOR/
SUBADVISOR
-------------------------------------------------------------------------
ASSET AST WELLINGTON MANAGEMENT HEDGED Wellington
ALLOCA EQUITY PORTFOLIO: seeks to Management
TION outperform a mix of 50% Russell 3000 Company, LLP
Index, 20% MSCI EAFE Index, and 30%
Treasury Bill Index over a full
market cycle by preserving capital
in adverse markets utilizing an
options strategy while maintaining
equity exposure to benefit from up
markets through investments in
Wellington Management's equity
investment strategies. The Portfolio
will use a broad spectrum of
Wellington Management's equity
investment strategies to invest in a
broadly diversified portfolio of
common stocks while also pursuing an
equity index option overlay
strategy. The equity index option
overlay strategy is designed to help
mitigate capital losses in adverse
market environments and employs a
put/spread collar to meet this goal.
The Portfolio will normally invest
at least 80% of its assets in common
stocks of small, medium and large
companies and may also invest up to
30% of its assets in equity
securities of foreign issuers and
non-dollar denominated securities.
-------------------------------------------------------------------------
FIXED AST WESTERN ASSET CORE PLUS BOND Western Asset
INCOME PORTFOLIO: seeks to maximize total Management
return, consistent with prudent Company
investment management and liquidity
needs, by investing to obtain the
average duration specified for the
Portfolio. The Portfolio invests,
under normal circumstances, at least
80% of the value of its assets in
debt and fixed-income securities.
The Portfolio's current target
average duration is generally 2.5 to
7 years. The Portfolio pursues this
objective by investing in all major
fixed income sectors with a bias
towards non-Treasuries. The
Portfolio has the ability to invest
up to 20% in below investment grade
securities. Securities rated below
investment grade are commonly known
as "junk bonds" or "high yield"
securities.
-------------------------------------------------------------------------
AIM VARIABLE INSURANCE
FUNDS (INVESCO VARIABLE INSURANCE
FUNDS)
-------------------------------------------------------------------------
MID CAP AIM VARIABLE INSURANCE FUNDS Invesco Advisers,
GROWTH (INVESCO VARIABLE INSURANCE FUNDS) - Inc.
INVESCO VAN KAMPEN V.I. MID CAP
GROWTH FUND - SERIES I SHARES
(formerly Invesco V.I. Capital
Development Fund - Series I shares):
seeks capital growth. Under normal
market conditions, Invesco Advisers,
Inc. (the Adviser), the Fund's
investment adviser, seeks to achieve
the Fund's investment objective by
investing primarily in common stocks
and other equity securities of
medium-sized companies that are
considered by the Adviser to have
strong earnings growth.
-------------------------------------------------------------------------
SPECIALTY AIM VARIABLE INSURANCE FUNDS Invesco Advisers,
(INVESCO VARIABLE INSURANCE FUNDS) - Inc.
INVESCO V.I. DIVERSIFIED DIVIDEND
FUND - SERIES I SHARES (formerly
Invesco V.I. Dividend Growth Fund -
Series I shares): seeks to provide
reasonable current income and
long-term growth of income and
capital. The Fund will normally
invest at least 80% of its net
assets (plus any borrowings for
investment purposes) in common
stocks of companies which pay
dividends and have the potential for
increasing dividends.
-------------------------------------------------------------------------
SPECIALTY AIM VARIABLE INSURANCE FUNDS Invesco Advisers,
(INVESCO VARIABLE INSURANCE FUNDS) - Inc.
INVESCO V.I. GLOBAL HEALTH CARE FUND
- SERIES I SHARES: seeks long-term
growth of capital. The Fund invests,
under normal circumstances, at least
80% of net assets (plus borrowings
for investment purposes) in
securities issued by domestic and
foreign companies and governments
engaged primarily in the health care
industry.
-------------------------------------------------------------------------
SPECIALTY AIM VARIABLE INSURANCE FUNDS Invesco Advisers,
(INVESCO VARIABLE INSURANCE FUNDS) - Inc.
INVESCO V.I. TECHNOLOGY FUND -
SERIES I SHARES: seeks long-term
growth of capital. The Fund invests,
under normal circumstances, at least
80% of net assets (plus borrowings
for investment purposes) in
securities of issuers engaged
primarily in technology-related
industries. The Fund invests
primarily in equity securities.
-------------------------------------------------------------------------
FIRST DEFINED PORTFOLIO FUND, LLC
-------------------------------------------------------------------------
SPECIALTY FIRST TRUST TARGET FOCUS FOUR First Trust Advisors
PORTFOLIO: seeks to provide L.P.
above-average capital appreciation.
The Portfolio seeks to achieve its
objective by investing in the common
stocks of companies which are
selected by applying four separate
uniquely specialized strategies (the
"Focus Four Strategy"). The Focus
Four Strategy adheres to a
disciplined investment process that
targets the following four
strategies: The Dow(R) Target
Dividend Strategy, Value Line(R)
Target 25 Strategy, S&P Target SMid
60 Strategy, and NYSE(R)
International Target 25 Strategy.
-------------------------------------------------------------------------
36
STYLE/ INVESTMENT OBJECTIVES/POLICIES PORTFOLIO
TYPE ADVISOR/
SUBADVISOR
-------------------------------------------------------------------------
SPECIALTY GLOBAL DIVIDEND TARGET 15 PORTFOLIO: First Trust Advisors
seeks to provide above-average total L.P.
return. The Portfolio seeks to
achieve its objective by investing
in common stocks issued by companies
that are expected to provide income
and to have the potential for
capital appreciation. The Portfolio
invests primarily in the common
stocks of the companies which are
components of the Dow Jones
Industrial Average/sm/ ("DJIA/sm/"),
the Financial Times Industrial
Ordinary Share Index ("FT Index")
and the Hang Seng Index. The
Portfolio primarily consists of
common stocks of the five companies
with the lowest per share stock
prices of the ten companies in each
of the DJIA/sm/, FT Index and Hang
Seng Index, respectively, that have
the highest dividend yields in the
respective index on or about the
applicable stock selection date.
Each security is initially equally
weighted in the portfolio on or
about the applicable stock selection
date.
-------------------------------------------------------------------------
SPECIALTY NASDAQ(R) TARGET 15 PORTFOLIO: seeks First Trust Advisors
to provide above-average total L.P.
return. Beginning with the stocks in
the NASDAQ-100 Index(R) on or about
the applicable stock selection date,
the Portfolio selects fifteen stocks
based on a multi-factor model. A
modified market capitalization
approach is used to initially weight
each security in the portfolio.
-------------------------------------------------------------------------
SPECIALTY S&P(R) TARGET 24 PORTFOLIO: seeks to First Trust Advisors
provide above-average total return. L.P.
Beginning with the stocks in the
Standard & Poor's 500 Index ("S&P
500 Index"), on or about the
applicable stock selection date, the
Portfolio selects three stocks from
each of the eight largest economic
sectors of the S&P 500 Index. The
twenty-four stocks are selected
based on a multi-factor model and a
modified market capitalization
approach is used to initially weight
each security in the portfolio.
-------------------------------------------------------------------------
SPECIALTY TARGET MANAGED VIP PORTFOLIO: seeks First Trust Advisors
to provide above-average total L.P.
return. The Portfolio seeks to
achieve its objective by investing
in common stocks of the companies
that are identified based on six
uniquely specialized strategies -
The Dow(R) DART 5, the European
Target 20, the NASDAQ(R) Target 15,
the S&P(R) Target 24, the Target
Small- Cap and the Value Line(R)
Target 25. Each strategy employs a
quantitative approach by screening
common stocks for certain attributes
and/or using a multi-factor scoring
system to select the common stocks.
-------------------------------------------------------------------------
SPECIALTY THE DOW(R) TARGET DIVIDEND First Trust Advisors
PORTFOLIO: seeks to provide L.P.
above-average total return. The
Portfolio seeks to achieve its
objective by investing in common
stocks issued by companies that are
expected to provide income and to
have the potential for capital
appreciation. Beginning with the
stocks in The Dow Jones U.S.Select
Dividend Index/sm/, on or about the
applicable stock selection date, the
Portfolio selects twenty common
stocks based on a multi-factor
model. Each security is initially
expected to be relatively equally
weighted in the portfolio on or
about the applicable stock selection
date.
-------------------------------------------------------------------------
SPECIALTY THE DOW(R) DART 10 PORTFOLIO: seeks First Trust Advisors
to provide above-average total L.P.
return. The Portfolio seeks to
achieve its objective by investing
in common stocks issued by companies
that are expected to provide income
and to have the potential for
capital appreciation. The Portfolio
invests primarily in the common
stocks of the ten companies in the
DJIA that have the highest combined
dividend yields and buyback ratios
on or about the applicable stock
selection date. Each security is
initially expected to be relatively
equally weighted in the portfolio on
or about the applicable stock
selection date.
-------------------------------------------------------------------------
SPECIALTY VALUE LINE(R) TARGET 25 PORTFOLIO: First Trust Advisors
seeks to provide above-average L.P.
capital appreciation. The Portfolio
seeks to achieve its objective by
investing in 25 of the 100 common
stocks that Value Line(R) gives a #1
ranking for Timelines/tm/. Value
Line(R) ranks approximately 1,700
stocks of which 100 are given their
#1 ranking for Timeliness(TM) which
measures Value Line's view of their
probable price performance during
the next six to 12 months relative
to the others. Beginning with the
100 stocks that Value Line(R) ranks
#1 for Timeliness(TM), on or about
the applicable stock selection date,
the Portfolio selects twenty five
stocks based on a multi-factor
model. A modified market
capitalization approach is used to
initially weight each security in
the portfolio.
-------------------------------------------------------------------------
37
STYLE/ INVESTMENT OBJECTIVES/POLICIES PORTFOLIO
TYPE ADVISOR/
SUBADVISOR
----------------------------------------------------------------------
FRANKLIN TEMPLETON VARIABLE
INSURANCE PRODUCTS TRUST
----------------------------------------------------------------------
MODERATE FRANKLIN TEMPLETON VIP FOUNDING Franklin
ALLO FUNDS ALLOCATION FUND: seeks capital Templeton
CATION appreciation, with income as a Services, LLC
secondary goal. The Fund normally
invests equal portions in Class 1
shares of Franklin Income Securities
Fund; Mutual Shares Securities Fund;
and Templeton Growth Securities
Fund. The Fund is not available as
an investment option to Owners who
purchase an Annuity on or after
April 30, 2012. Owners who have
purchased an Annuity prior to April
30, 2012 and have invested in the
Fund at any time since they have
owned their Annuity, may continue to
allocate Purchase Payments to the
Fund after this date, including
through Dollar Cost Averaging,
Automatic Rebalancing, or comparable
programs. However, Owners should be
aware that all monies that they have
invested in the Fund are scheduled
to be transferred to the AST
Franklin Templeton Founding Funds
Allocation Portfolio by way of a
fund substitution anticipated to
take place in June 2012, pending the
receipt of the necessary regulatory
approvals. Once the fund
substitution is completed, the Fund
will no longer be available for
investments by any Owners.
----------------------------------------------------------------------
NATIONWIDE VARIABLE INSURANCE TRUST
----------------------------------------------------------------------
INTER NVIT DEVELOPING MARKETS FUND: seeks Nationwide Fund
NATIONAL long-term capital appreciation, Advisors/The
EQUITY under normal conditions by investing Boston Company
at least 80% of its net assets in Asset Management,
equity securities of companies that LLC
are tied economically to emerging
market countries. The Fund typically
maintains investments in at least
six countries at all times.
----------------------------------------------------------------------
PROFUND VP
----------------------------------------------------------------------
EACH PROFUND VP PORTFOLIO DESCRIBED BELOW IS DESIGNED TO SEEK DAILY
INVESTMENT RESULTS THAT, BEFORE FEES AND EXPENSES, CORRESPOND TO THE
PERFORMANCE OF A DAILY BENCHMARK, SUCH AS THE DAILY PERFORMANCE OF
AN INDEX OR SECURITY, OR THE INVERSE (-1X), A MULTIPLE (I.E., 1.25X
OR 2X), OR AN INVERSE MULTIPLE (I.E., -1.25X OR -2X) OF THE DAILY
PERFORMANCE OF AN INDEX OR SECURITY. EACH CLASSIC PROFUND VP AND
SECTOR PROFUND VP PORTFOLIO SEEKS TO PROVIDE DAILY INVESTMENT
RESULTS, BEFORE FEES AND EXPENSES, THAT MATCH (1X) THE DAILY
PERFORMANCE OF ITS BENCHMARK. EACH ULTRA PROFUND VP PORTFOLIO SEEKS
TO PROVIDE DAILY INVESTMENT RESULTS, BEFORE FEES AND EXPENSES, THAT
CORRESPOND TO A MULTIPLE (I.E., 1.25X OR 2X) OF THE DAILY
PERFORMANCE OF ITS BENCHMARK. EACH INVERSE PROFUND VP PORTFOLIO
SEEKS TO PROVIDE DAILY INVESTMENT RESULTS, BEFORE FEES AND EXPENSES,
THAT CORRESPOND TO THE INVERSE (-1X) OR AN INVERSE MULTIPLE (I.E.,
-1.25X OR -2X) OF THE DAILY PERFORMANCE OF ITS BENCHMARK. THE
INVESTMENT STRATEGY OF SOME OF THE PORTFOLIOS MAY MAGNIFY (BOTH
POSITIVELY AND NEGATIVELY) THE DAILY INVESTMENT RESULTS OF THE
APPLICABLE INDEX OR SECURITY. IT IS RECOMMENDED THAT ONLY THOSE
ANNUITY OWNERS WHO ENGAGE A FINANCIAL ADVISOR TO ALLOCATE THEIR
ACCOUNT VALUE USING A STRATEGIC OR TACTICAL ASSET ALLOCATION
STRATEGY INVEST IN THESE PORTFOLIOS. THE PORTFOLIOS ARE ARRANGED
BASED ON THE INDEX ON WHICH ITS INVESTMENT STRATEGY IS BASED.
----------------------------------------------------------------------
SPECIALTY PROFUND VP BULL: seeks daily ProFund Advisors
investment results, before fees and LLC
expenses, that correspond to the
daily performance of the S&P 500(R)
(the "Index"). To meet its
investment objective, the Fund
invests in equity securities and
derivatives that ProFund Advisors
believes, in combination, should
have similar daily return
characteristics as the daily return
of the Index.
----------------------------------------------------------------------
SPECIALTY PROFUND VP BEAR: seeks daily ProFund Advisors
investment results, before fees and LLC
expenses, that correspond to the
inverse (-1x) of the daily
performance of the S&P 500(R) (the
"Index"). To meet its investment
objective, the Fund invests in
derivatives that ProFund Advisors
believes, in combination, should
have similar daily return
characteristics as the inverse (-1x)
of the daily return of the Index.
----------------------------------------------------------------------
SPECIALTY PROFUND VP ULTRABULL: seeks daily ProFund Advisors
investment results, before fees and LLC
expenses, that correspond to twice
(2x) the daily performance of the
S&P 500(R) (the "Index"). To meet
its investment objective, the Fund
invests equity securities and
derivatives that ProFund Advisors
believes, in combination, should
have similar daily return
characteristics as twice (2x) the
daily return of the Index.
----------------------------------------------------------------------
THE S&P 500(R) IS A MEASURE OF LARGE-CAP U.S. STOCK MARKET
PERFORMANCE. IT IS A FLOAT-ADJUSTED MARKET CAPITALIZATION WEIGHTED
INDEX OF 500 U.S. OPERATING COMPANIES AND REAL ESTATE INVESTMENT
TRUSTS SELECTED THROUGH A PROCESS THAT FACTORS CRITERIA SUCH AS
LIQUIDITY, PRICE, MARKET CAPITALIZATION AND FINANCIAL VIABILITY.
----------------------------------------------------------------------
38
STYLE/ INVESTMENT OBJECTIVES/POLICIES PORTFOLIO
TYPE ADVISOR/
SUBADVISOR
------------------------------------------------------------------------
SPECIALTY PROFUND VP NASDAQ-100: seeks daily ProFund Advisors
investment results, before fees and LLC
expenses, that correspond to the
daily performance of the NASDAQ-100
Index(R) (the "Index"). To meet its
investment objective, the Fund
invests in equity securities and
derivatives that ProFund Advisors
believes, in combination, should
have similar daily return
characteristics as the daily return
of the Index.
------------------------------------------------------------------------
SPECIALTY PROFUND VP SHORT NASDAQ-100: seeks ProFund Advisors
daily investment results, before LLC
fees and expenses, that correspond
to the inverse (-1x) of the daily
performance of the NASDAQ-100
Index(R) (the "Index"). To meet its
investment objective, the Fund
invests in derivatives that ProFund
Advisors believes, in combination,
should have similar daily return
characteristics as the inverse (-1x)
of the daily return of the Index.
------------------------------------------------------------------------
SPECIALTY PROFUND VP ULTRANASDAQ-100: seeks ProFund Advisors
daily investment results, before LLC
fees and expenses, that correspond
to twice (2x) the daily performance
of the NASDAQ-100 Index(R) (the
"Index"). To meet its investment
objective, the Fund invests equity
securities and derivatives that
ProFund Advisors believes, in
combination, should have similar
daily return characteristics as
twice (2x) the daily return of the
Index(R).
------------------------------------------------------------------------
THE NASDAQ-100 INDEX(R) INCLUDES 100 OF THE LARGEST NON-FINANCIAL
DOMESTIC AND INTERNATIONAL ISSUES LISTED ON THE NASDAQ STOCK MARKET.
------------------------------------------------------------------------
SPECIALTY PROFUND VP ULTRASMALL-CAP: seeks ProFund Advisors
daily investment results, before LLC
fees and expenses, that correspond
to twice (2x) the daily performance
of the Russell 2000(R) Index (the
"Index"). To meet its investment
objective, the Fund invests in
equity securities and derivatives
that ProFund Advisors believes, in
combination, should have similar
daily return characteristics as
twice (2x) the daily return of the
Index.
------------------------------------------------------------------------
SPECIALTY PROFUND VP SHORT SMALL-CAP: seeks ProFund Advisors
daily investment results, before LLC
fees and expenses, that correspond
to the inverse (-1x) of the daily
performance of the Russell 2000(R)
Index (the "Index"). To meet its
investment objective, the Fund
invests in derivatives that ProFund
Advisors believes, in combination,
should have similar daily return
characteristics as the inverse (-1x)
of the daily return of the Index.
------------------------------------------------------------------------
THE RUSSELL 2000 INDEX IS A MEASURE OF SMALL-CAP U.S. STOCK MARKET
PERFORMANCE. IT IS AN ADJUSTED MARKET CAPITALIZATION WEIGHTED INDEX
CONTAINING APPROXIMATELY 2000 OF THE SMALLEST COMPANIES IN THE
RUSSELL 3000 INDEX OR APPROXIMATELY 8% OF THE TOTAL MARKET
CAPITALIZATION OF THE RUSSELL 3000 INDEX, WHICH IN TURN REPRESENTS
APPROXIMATELY 98% OF THE INVESTABLE U.S. EQUITY MARKET.
------------------------------------------------------------------------
SPECIALTY PROFUND VP ULTRAMID-CAP: seeks daily ProFund Advisors
investment results, before fees and LLC
expenses, that correspond to twice
(2x) the daily performance of the
S&P MidCap 400(R) (the "Index"). To
meet its investment objective, the
Fund invests in equity securities
and derivatives that ProFund
Advisors believes, in combination,
should have similar daily return
characteristics as twice (2x) the
daily return of the Index.
------------------------------------------------------------------------
SPECIALTY PROFUND VP SHORT MID-CAP: seeks ProFund Advisors
daily investment results, before LLC
fees and expenses, that correspond
to the inverse (-1x) of the daily
performance of the S&P MidCap 400(R)
(the "Index"). To meet its
investment objective, the Fund
invests in derivatives that ProFund
Advisors believes, in combination,
should have similar daily return
characteristics as the inverse (-1x)
of the daily return of the Index.
------------------------------------------------------------------------
THE S&P MIDCAP 400(R) IS A MEASURE OF MID-SIZE COMPANY U.S. STOCK
MARKET PERFORMANCE. IT IS A FLOAT-ADJUSTED MARKET CAPITALIZATION
WEIGHTED INDEX OF 400 U.S. OPERATING COMPANIES AND REAL ESTATE
INVESTMENT TRUSTS SELECTED THROUGH A PROCESS THAT FACTORS CRITERIA
SUCH AS LIQUIDITY, PRICE, MARKET CAPITALIZATION AND FINANCIAL
VIABILITY.
------------------------------------------------------------------------
39
STYLE/ INVESTMENT OBJECTIVES/POLICIES PORTFOLIO
TYPE ADVISOR/
SUBADVISOR
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SMALL CAP PROFUND VP SMALL-CAP VALUE: seeks ProFund Advisors
VALUE daily investment results, before LLC
fees and expenses, that correspond
to the daily performance of the S&P
SmallCap 600(R) Value Index (the
"Index"). To meet its investment
objective, the Fund invests in
equity securities that ProFund
Advisors believes, in combination,
should have similar daily return
characteristics as the daily return
of the Index.
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THE S&P SMALLCAP 600(R) VALUE INDEX IS DESIGNED TO PROVIDE A
COMPREHENSIVE MEASURE OF SMALL-CAP U.S. EQUITY "VALUE" PERFORMANCE.
IT IS AN UNMANAGED FLOAT-ADJUSTED, MARKET CAPITALIZATION WEIGHTED
INDEX COMPRISING STOCKS REPRESENTING APPROXIMATELY HALF THE MARKET
CAPITALIZATION OF THE S&P SMALLCAP 600 THAT HAVE BEEN IDENTIFIED AS
BEING ON THE VALUE END OF THE GROWTH-VALUE SPECTRUM. IT IS A FLOAT
ADJUSTED, MARKET CAPITALIZATION WEIGHTED INDEX OF 600 U.S.
OPERATING COMPANIES. SECURITIES ARE SELECTED FOR INCLUSION IN THE
INDEX BY AN S&P COMMITTEE THROUGH A NON-MECHANICAL PROCESS THAT
FACTORS IN CRITERIA SUCH AS LIQUIDITY, PRICE, MARKET
CAPITALIZATION, FINANCIAL VIABILITY, AND PUBLIC FLOAT.
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SMALL CAP PROFUND VP SMALL-CAP GROWTH: seeks ProFund Advisors
GROWTH daily investment results, before LLC
fees and expenses, that correspond
to the daily performance of the S&P
SmallCap 600(R) Growth Index(R) (the
"Index"). To meet its investment
objective, the Fund invests in
equity securities that ProFund
Advisors believes, in combination,
should have similar daily return
characteristics as the daily return
of the Index.
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THE S&P SMALLCAP 600(R) GROWTH INDEX IS DESIGNED TO PROVIDE A
COMPREHENSIVE MEASURE OF SMALL-CAP U.S. EQUITY "GROWTH"
PERFORMANCE. IT IS AN UNMANAGED FLOAT-ADJUSTED, MARKET
CAPITALIZATION WEIGHTED INDEX COMPRISING STOCKS REPRESENTING
APPROXIMATELY HALF THE MARKET CAPITALIZATION OF THE S&P SMALLCAP
600 THAT HAVE BEEN IDENTIFIED AS BEING ON THE GROWTH END OF THE
GROWTH-VALUE SPECTRUM. IT IS A FLOAT-ADJUSTED, MARKET
CAPITALIZATION WEIGHTED INDEX OF 600 U.S. OPERATING COMPANIES.
SECURITIES ARE SELECTED FOR INCLUSION IN THE INDEX BY AN S&P
COMMITTEE THROUGH A NON-MECHANICAL PROCESS THAT FACTORS IN CRITERIA
SUCH AS LIQUIDITY, PRICE, MARKET CAPITALIZATION, FINANCIAL
VIABILITY, AND PUBLIC FLOAT.
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LARGE CAP PROFUND VP LARGE-CAP VALUE: seeks ProFund Advisors
VALUE daily investment results, before LLC
fees and expenses, that correspond
to the daily performance of the S&P
500(R) Value Index (the "Index"). To
meet its investment objective, the
Fund invests in equity securities
that ProFund Advisors believes, in
combination, should have similar
daily return characteristics as the
daily return of the Index.
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THE S&P 500(R) VALUE INDEX IS DESIGNED TO PROVIDE A COMPREHENSIVE
MEASURE OF LARGE-CAP U.S. EQUITY "VALUE" PERFORMANCE. IT IS AN
UNMANAGED FLOAT-ADJUSTED MARKET CAPITALIZATION WEIGHTED INDEX
COMPRISING STOCKS REPRESENTING APPROXIMATELY HALF THE MARKET
CAPITALIZATION OF THE S&P 500 THAT HAVE BEEN IDENTIFIED AS BEING ON
THE VALUE END OF THE GROWTH-VALUE SPECTRUM.
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LARGE CAP PROFUND VP LARGE-CAP GROWTH: seeks ProFund Advisors
GROWTH daily investment results, before LLC
fees and expenses, that correspond
to the daily performance of the S&P
500(R) Growth Index (the "Index").
To meet its investment objective,
the Fund invests in equity
securities that ProFund Advisors
believes, in combination, should
have similar daily return
characteristics as the daily return
of the Index.
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THE S&P 500(R) GROWTH INDEX IS DESIGNED TO PROVIDE A COMPREHENSIVE
MEASURE OF LARGE-CAP U.S. EQUITY "GROWTH" PERFORMANCE. IT IS AN
UNMANAGED FLOAT ADJUSTED MARKET CAPITALIZATION WEIGHTED INDEX
COMPRISED OF STOCKS REPRESENTING APPROXIMATELY HALF THE MARKET
CAPITALIZATION OF THE S&P 500 THAT HAVE BEEN IDENTIFIED AS BEING ON
THE GROWTH END OF THE GROWTH-VALUE SPECTRUM.
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MID CAP PROFUND VP MID-CAP VALUE: seeks ProFund Advisors
VALUE daily investment results, before LLC
fees and expenses, that correspond
to the daily performance of the S&P
MidCap 400(R) Value Index (the
"Index"). To meet its investment
objective, the Fund invests in
equity securities that ProFund
Advisors believes, in combination,
should have similar daily return
characteristics as the daily return
of the Index.
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THE S&P MIDCAP 400(R) VALUE INDEX IS DESIGNED TO PROVIDE A
COMPREHENSIVE MEASURE OF MID-CAP U.S. EQUITY "VALUE" PERFORMANCE.
IT IS AN UNMANAGED FLOAT ADJUSTED MARKET CAPITALIZATION WEIGHTED
INDEX COMPRISED OF STOCKS REPRESENTING APPROXIMATELY HALF THE
MARKET CAPITALIZATION OF THE S&P MIDCAP 400 THAT HAVE BEEN
IDENTIFIED AS BEING ON THE VALUE END OF THE GROWTH-VALUE SPECTRUM.
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40
STYLE/ INVESTMENT OBJECTIVES/POLICIES PORTFOLIO
TYPE ADVISOR/
SUBADVISOR
---------------------------------------------------------------------
MID CAP PROFUND VP MID-CAP GROWTH: seeks ProFund Advisors
GROWTH daily investment results, before LLC
fees and expenses, that correspond
to the daily performance of the S&P
MidCap 400(R) Growth Index(R) (the
"Index"). To meet its investment
objective, the Fund invests in
equity securities that ProFund
Advisors believes, in combination,
should have similar daily return
characteristics as the daily return
of the Index.
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THE S&P MIDCAP 400(R) GROWTH INDEX IS DESIGNED TO PROVIDE A
COMPREHENSIVE MEASURE OF MID-CAP U.S. EQUITY "GROWTH" PERFORMANCE.
IT IS AN UNMANAGED FLOAT ADJUSTED MARKET CAPITALIZATION WEIGHTED
INDEX COMPRISED OF STOCKS REPRESENTING APPROXIMATELY HALF THE
MARKET CAPITALIZATION OF THE S&P MIDCAP 400 THAT HAVE BEEN
IDENTIFIED AS BEING ON THE GROWTH END OF THE GROWTH-VALUE SPECTRUM.
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SPECIALTY PROFUND VP ASIA 30: seeks daily ProFund Advisors
investment results, before fees and LLC
expenses, that correspond to the
daily performance of the ProFunds
Asia 30 Index(R) (the "Index"). To
meet its investment objective, the
Fund invests in equity securities,
depositary receipts and derivatives
that ProFund Advisors believes, in
combination, should have similar
daily return characteristics as the
daily return of the Index.
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THE PROFUNDS ASIA 30 INDEX, CREATED BY PROFUND ADVISORS, IS
COMPOSED OF COMPANIES WHOSE PRINCIPAL OFFICES ARE LOCATED IN ASIA,
AND WHOSE SECURITIES ARE TRADED ON U.S. EXCHANGES OR ON THE NASDAQ
AS DEPOSITORY RECEIPTS OR ORDINARY SHARES. THE COMPONENT COMPANIES
IN THE PROFUNDS ASIA 30 INDEX ARE DETERMINED ANNUALLY BASED UPON
THEIR U.S. DOLLAR-TRADED VOLUME. THEIR RELATIVE WEIGHTS ARE
DETERMINED BASED ON THE MODIFIED MARKET CAPITALIZATION METHOD.
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SPECIALTY PROFUND VP EUROPE 30: seeks daily ProFund Advisors
investment results, before fees and LLC
expenses, that correspond to the
daily performance of the ProFunds
Europe 30 Index(R) (the "Index"). To
meet its investment objective, the
Fund invests in equity securities
depositary receipts, and derivatives
that ProFund Advisors believes, in
combination, should have similar
daily return characteristics as the
daily return of the Index.
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THE PROFUNDS EUROPE 30 INDEX, CREATED BY PROFUND ADVISORS, IS
COMPOSED OF COMPANIES WHOSE PRINCIPAL OFFICES ARE LOCATED IN EUROPE
AND WHOSE SECURITIES ARE TRADED ON U.S. EXCHANGES OR ON THE NASDAQ
AS DEPOSITARY RECEIPTS OR ORDINARY SHARES. THE COMPONENT COMPANIES
IN THE PROFUNDS EUROPE 30 INDEX ARE DETERMINED ANNUALLY BASED UPON
THEIR U.S. DOLLAR- TRADED VOLUME. THEIR RELATIVE WEIGHTS ARE
DETERMINED BASED ON A MODIFIED MARKET CAPITALIZATION METHOD.
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SPECIALTY PROFUND VP JAPAN: seeks daily ProFund Advisors
investment results, before fees and LLC
expenses, that correspond to the
daily performance of the Nikkei 225
Stock Average (the "Index"). To meet
its investment objective, the Fund
invests in derivatives that ProFund
Advisors believes, in combination,
should have similar daily return
characteristics as the daily return
of the Index. The Fund seeks to
provide a return consistent with an
investment in the component equities
in the Nikkei 225 Stock Average
hedged to U.S. dollars. The Fund
determines its success in meeting
this investment objective by
comparing its daily return on a
given day with the daily performance
of the dollar-denominated Nikkei 225
futures contracts traded in the
United States.
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THE NIKKEI 225 STOCK AVERAGE ("NIKKEI" ) IS A MODIFIED
PRICE-WEIGHTED INDEX OF THE 225 MOST ACTIVELY TRADED AND LIQUID
JAPANESE COMPANIES LISTED IN THE FIRST SECTION OF THE TOKYO STOCK
EXCHANGE (TSE). THE NIKKEI IS CALCULATED FROM THE PRICES OF THE 225
TSE FIRST SECTION STOCKS SELECTED TO REPRESENT A BROAD
CROSS-SECTION OF JAPANESE INDUSTRIES AND THE OVERALL PERFORMANCE OF
THE JAPANESE EQUITY MARKET. NIHON KEIZAI SHIMBUN, INC. IS THE
SPONSOR OF THE INDEX. COMPANIES IN THE NIKKEI ARE REVIEWED
ANNUALLY. EMPHASIS IS PLACED ON MAINTAINING THE INDEX'S HISTORICAL
CONTINUITY WHILE KEEPING THE INDEX COMPOSED OF STOCKS WITH HIGH
MARKET LIQUIDITY. THE SPONSOR CONSULTS WITH VARIOUS MARKET EXPERTS,
CONSIDERS COMPANY- SPECIFIC INFORMATION AND THE OVERALL COMPOSITION
OF THE NIKKEI.
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SPECIALTY PROFUND VP BANKS: seeks daily ProFund Advisors
investment results, before fees and LLC
expenses, that correspond to the
daily performance of the Dow Jones
U.S. Banks Index(R) (the "Index").
To meet its investment objective,
the Fund invests in equity
securities and derivatives that
ProFund Advisors believes, in
combination, should have similar
daily return characteristics as the
daily return of the Index.
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THE DOW JONES U.S. BANKS INDEX MEASURES THE PERFORMANCE OF THE
BANKING SECTOR OF THE U.S. EQUITY MARKET. COMPONENT COMPANIES
INCLUDE, AMONG OTHERS, REGIONAL AND MAJOR U.S. DOMICILED BANKS
ENGAGED IN A WIDE RANGE OF FINANCIAL SERVICES, INCLUDING RETAIL
BANKING, LOANS AND MONEY TRANSMISSIONS.
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41
STYLE/ INVESTMENT OBJECTIVES/POLICIES PORTFOLIO
TYPE ADVISOR/
SUBADVISOR
---------------------------------------------------------------------
SPECIALTY PROFUND VP BASIC MATERIALS: seeks ProFund Advisors
daily investment results, before LLC
fees and expenses, that correspond
to the daily performance of the Dow
Jones U.S. Basic Materials Index
(the "Index"). To meet its
investment objective, the Fund
invests in equity securities that
ProFund Advisors believes, in
combination, should have similar
daily return characteristics as the
daily return of the Index.
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THE DOW JONES U.S. BASIC MATERIALS INDEX MEASURES THE PERFORMANCE
OF THE BASIC MATERIALS SECTOR OF THE U.S. EQUITY MARKET. COMPONENT
COMPANIES ARE INVOLVED IN THE PRODUCTION OF ALUMINUM, STEEL,
NON-FERROUS METALS, COMMODITY CHEMICALS, SPECIALTY CHEMICALS,
FOREST PRODUCTS, PAPER PRODUCTS, AS WELL AS THE MINING OF PRECIOUS
METALS AND COAL.
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SPECIALTY PROFUND VP BIOTECHNOLOGY: seeks ProFund Advisors
daily investment results, before LLC
fees and expenses, that correspond
to the daily performance of the Dow
Jones U.S. Biotechnology Index (the
"Index"). To meet its investment
objective, the Fund invests in
equity securities and derivatives
that ProFund Advisors believes, in
combination, should have similar
daily return characteristics as the
daily return of the Index.
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THE DOW JONES U.S. BIOTECHNOLOGY INDEX MEASURES THE PERFORMANCE OF
THE BIOTECHNOLOGY SECTOR OF THE U.S. EQUITY MARKET. COMPONENT
COMPANIES ENGAGE IN RESEARCH AND DEVELOPMENT OF BIOLOGICAL
SUBSTANCES FOR DRUG DISCOVERY AND DIAGNOSTIC DEVELOPMENT. THESE
COMPANIES DERIVE MOST OF THEIR REVENUE FROM THE SALE OF LICENSING
OF DRUGS AND DIAGNOSTIC TOOLS.
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SPECIALTY PROFUND VP CONSUMER GOODS: seeks ProFund Advisors
daily investment results, before LLC
fees and expenses, that correspond
to the daily performance of the Dow
Jones U.S. Consumer Goods Index (the
"Index"). To meet its investment
objective, the Fund invests in
equity securities that ProFund
Advisors believes, in combination,
should have similar daily return
characteristics as the daily return
of the Index.
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THE DOW JONES U.S. CONSUMER GOODS/SM/ INDEX MEASURES THE
PERFORMANCE OF CONSUMER GOODS SECTOR OF THE U.S. EQUITY MARKET.
COMPONENT COMPANIES INCLUDE, AMONG OTHERS, AUTOMOBILES AND AUTO
PARTS AND TIRES, BREWERS AND DISTILLERS, FARMING AND FISHING,
DURABLE AND NON-DURABLE HOUSEHOLD PRODUCT MANUFACTURERS, COSMETIC
COMPANIES, FOOD AND TOBACCO PRODUCTS, CLOTHING, ACCESSORIES AND
FOOTWEAR.
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SPECIALTY PROFUND VP CONSUMER SERVICES: seeks ProFund Advisors
daily investment results, before LLC
fees and expenses, that correspond
to the daily performance of the Dow
Jones U.S. Consumer Services Index
(the "Index"). To meet its
investment objective, the Fund
invests in equity securities that
ProFund Advisors believes, in
combination, should have similar
daily return characteristics as the
daily return of the Index.
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THE DOW JONES U.S. CONSUMER SERVICES INDEX MEASURES THE PERFORMANCE
OF CONSUMER SERVICES SECTOR OF THE U.S. EQUITY MARKET. COMPONENT
COMPANIES INCLUDE, AMONG OTHERS, AIRLINES, BROADCASTING AND
ENTERTAINMENT, APPAREL AND BROADLINE RETAILERS, FOOD AND DRUG
RETAILERS, MEDIA AGENCIES, PUBLISHING, GAMBLING, HOTELS,
RESTAURANTS AND BARS, AND TRAVEL AND TOURISM.
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SPECIALTY PROFUND VP FINANCIALS: seeks daily ProFund Advisors
investment results, before fees and LLC
expenses, that correspond to the
daily performance of the Dow Jones
U.S. Financials Index (the "Index").
To meet its investment objective,
the Fund invests in equity
securities that ProFund Advisors
believes, in combination, should
have similar daily return
characteristics as the daily return
of the Index.
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THE DOW JONES U.S. FINANCIALS INDEX MEASURES THE PERFORMANCE OF THE
FINANCIAL SERVICES SECTOR OF THE U.S. EQUITY MARKET. COMPONENT
COMPANIES INCLUDE, AMONG OTHERS, REGIONAL BANKS; MAJOR U.S.
DOMICILED INTERNATIONAL BANKS; FULL LINE, LIFE, AND PROPERTY AND
CASUALTY INSURANCE COMPANIES; COMPANIES THAT INVEST, DIRECTLY OR
INDIRECTLY IN REAL ESTATE; DIVERSIFIED FINANCIAL COMPANIES SUCH AS
FANNIE MAE, CREDIT CARD ISSUERS, CHECK CASHING COMPANIES, MORTGAGE
LENDERS AND INVESTMENT ADVISERS; SECURITIES BROKERS AND DEALERS,
INCLUDING INVESTMENT BANKS, MERCHANT BANKS AND ONLINE BROKERS; AND
PUBLICLY TRADED STOCK EXCHANGES.
---------------------------------------------------------------------
42
STYLE/ INVESTMENT OBJECTIVES/POLICIES PORTFOLIO
TYPE ADVISOR/
SUBADVISOR
------------------------------------------------------------------------
SPECIALTY PROFUND VP HEALTH CARE: seeks daily ProFund Advisors
investment results, before fees and LLC
expenses, that correspond to the
daily performance of the Dow Jones
U.S. Health Care/SM/ Index (the
"Index"). To meet its investment
objective, the Fund invests in
equity securities that ProFund
Advisors believes, in combination,
should have similar daily return
characteristics as the daily return
of the Index.
------------------------------------------------------------------------
THE DOW JONES U.S. HEALTH CARE/SM/ INDEX MEASURES THE PERFORMANCE
OF THE HEALTHCARE INDUSTRY OF THE U.S. EQUITY MARKET. COMPONENT
COMPANIES INCLUDE, AMONG OTHERS, HEALTH CARE PROVIDERS,
BIOTECHNOLOGY COMPANIES, MEDICAL SUPPLIES, ADVANCED MEDICAL DEVICES
AND PHARMACEUTICALS.
------------------------------------------------------------------------
SPECIALTY PROFUND VP INDUSTRIALS: seeks daily ProFund Advisors
investment results, before fees and LLC
expenses, that correspond to the
daily performance of the Dow Jones
U.S. Industrials Index (the
"Index"). To meet its investment
objective, the Fund invests in
equity securities that ProFund
Advisors believes, in combination,
should have similar daily return
characteristics as the daily return
of the Index.
------------------------------------------------------------------------
THE DOW JONES U.S. INDUSTRIALS/SM/ INDEX MEASURES THE PERFORMANCE
OF THE INDUSTRIAL INDUSTRY OF THE U.S. EQUITY MARKET. COMPONENT
COMPANIES INCLUDE, AMONG OTHERS, BUILDING MATERIALS, HEAVY
CONSTRUCTION, FACTORY EQUIPMENT, HEAVY MACHINERY, INDUSTRIAL
SERVICES, POLLUTION CONTROL, CONTAINERS AND PACKAGING, INDUSTRIAL
DIVERSIFIED, AIR FREIGHT, MARINE TRANSPORTATION, RAILROADS,
TRUCKING, LAND-TRANSPORTATION EQUIPMENT, SHIPBUILDING,
TRANSPORTATION SERVICES, ADVANCED INDUSTRIAL EQUIPMENT, ELECTRIC
COMPONENTS AND EQUIPMENT, AND AEROSPACE.
------------------------------------------------------------------------
SPECIALTY PROFUND VP INTERNET: seeks daily ProFund Advisors
investment results, before fees and LLC
expenses, that correspond to the
daily performance of the Dow Jones
Internet Composite/SM/ Index. To
meet its investment objective, the
Fund invests in equity securities
that ProFund Advisors believes, in
combination, should have similar
daily return characteristics as the
daily return of the Index.
------------------------------------------------------------------------
THE DOW JONES INTERNET COMPOSITE/SM/ INDEX MEASURES THE PERFORMANCE
OF STOCKS IN THE U.S. EQUITY MARKETS THAT GENERATE THE MAJORITY OF
THEIR REVENUES FROM THE INTERNET. THE INDEX IS COMPOSED OF TWO
SUB-GROUPS: INTERNET COMMERCE, WHICH INCLUDES COMPANIES THAT DERIVE
THE MAJORITY OF THEIR REVENUES FROM PROVIDING GOODS AND/OR SERVICES
THROUGH AN OPEN NETWORK, SUCH AS A WEBSITE, AND INTERNET SERVICES,
WHICH INCLUDE COMPANIES THAT DERIVE THE MAJORITY OF THEIR REVENUES
FROM PROVIDING ACCESS TO THE INTERNET OR PROVIDING SERVICES TO
PEOPLE USING THE INTERNET.
------------------------------------------------------------------------
SPECIALTY PROFUND VP OIL & GAS: seeks daily ProFund Advisors
investment results, before fees and LLC
expenses, that correspond to the
daily performance of the Dow Jones
U.S. Oil & Gas/SM/ Index (the
"Index"). To meet its investment
objective, the Fund invests in
equity securities and derivatives
that ProFund Advisors believes, in
combination, should have similar
daily return characteristics as the
daily return of the Index.
------------------------------------------------------------------------
THE DOW JONES U.S. OIL & GAS/SM/ INDEX MEASURES THE PERFORMANCE OF
THE OIL AND GAS SECTOR OF THE U.S. EQUITY MARKET. COMPONENT
COMPANIES INCLUDE, AMONG OTHERS, EXPLORATION AND PRODUCTION,
INTEGRATED OIL AND GAS, OIL EQUIPMENT AND SERVICES, PIPELINES,
RENEWABLE ENERGY EQUIPMENT COMPANIES AND ALTERNATIVE FUEL PRODUCERS.
------------------------------------------------------------------------
SPECIALTY PROFUND VP PHARMACEUTICALS: seeks ProFund Advisors
daily investment results, before LLC
fees and expenses, that correspond
to the daily performance of the Dow
Jones U.S. Pharmaceuticals Index
(the "Index"). To meet its
investment objective, the Fund
invests in equity securities and
derivatives that ProFund Advisors
believes, in combination, should
have similar daily return
characteristics as the daily return
of the Index.
------------------------------------------------------------------------
THE DOW JONES U.S. PHARMACEUTICALS/SM/ INDEX MEASURES THE
PERFORMANCE OF THE PHARMACEUTICALS SECTOR OF THE U.S. EQUITY
MARKET. COMPONENT COMPANIES INCLUDE, AMONG OTHERS, THE MAKERS OF
PRESCRIPTION AND OVER-THE-COUNTER DRUGS SUCH AS BIRTH CONTROL
PILLS, VACCINES, ASPIRIN AND COLD REMEDIES.
------------------------------------------------------------------------
43
STYLE/ INVESTMENT OBJECTIVES/POLICIES PORTFOLIO
TYPE ADVISOR/
SUBADVISOR
---------------------------------------------------------------------
SPECIALTY PROFUND VP PRECIOUS METALS: seeks ProFund Advisors
daily investment results, before LLC
fees and expenses, that correspond
to the daily performance of the Dow
Jones Precious Metals Index (the
"Index"). To meet its investment
objective, the Fund invests in
derivatives that ProFund Advisors
believes, in combination, should
have similar daily return
characteristics as the daily return
of the Index.
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THE DOW JONES PRECIOUS METALS INDEX MEASURES THE PERFORMANCE OF THE
PRECIOUS METALS MINING SECTOR. COMPONENT COMPANIES INCLUDE, AMONG
OTHERS, LEADING MINERS AND PRODUCERS OF GOLD, SILVER AND
PLATINUM-GROUP METALS WHOSE SECURITIES ARE AVAILABLE TO U.S.
INVESTORS DURING U.S. TRADING HOURS. IT IS A FLOAT-ADJUSTED
MARKET-CAPITALIZATION WEIGHTED INDEX.
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SPECIALTY PROFUND VP REAL ESTATE: seeks daily ProFund Advisors
investment results, before fees and LLC
expenses, that correspond to the
daily performance of the Dow Jones
U.S. Real Estate Index (the
"Index"). To meet its investment
objective, the Fund invests in
equity securities that ProFund
Advisors believes, in combination,
should have similar daily return
characteristics as the daily return
of the Index.
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THE DOW JONES U.S. REAL ESTATE/SM/ INDEX MEASURES THE PERFORMANCE
OF THE REAL ESTATE SECTOR OF THE U.S. EQUITY MARKET. COMPONENT
COMPANIES INCLUDE REAL ESTATE HOLDING AND DEVELOPMENT AND REAL
ESTATE SERVICE COMPANIES AND REAL ESTATE INVESTMENT TRUSTS
("REITS") THAT INVEST IN INDUSTRIAL, OFFICES AND RETAIL PROPERTIES.
REITS ARE PASSIVE INVESTMENT VEHICLES THAT INVEST PRIMARILY IN
INCOME-PRODUCING REAL ESTATE OR REAL ESTATE RELATED LOANS AND
INTERESTS.
---------------------------------------------------------------------
SPECIALTY PROFUND VP SEMICONDUCTOR: seeks ProFund Advisors
daily investment results, before LLC
fees and expenses, that correspond
to the daily performance of the Dow
Jones U.S. Semiconductors Index (the
"Index"). To meet its investment
objective, the Fund invests in
equity securities and derivatives
that ProFund Advisors believes, in
combination, should have similar
daily return characteristics as the
daily return of the Index.
---------------------------------------------------------------------
THE DOW JONES U.S. SEMICONDUCTORS/SM/ INDEX MEASURES THE
PERFORMANCE OF THE SEMICONDUCTOR SECTOR OF THE U.S. EQUITY MARKET.
COMPONENT COMPANIES ARE ENGAGED IN THE PRODUCTION OF SEMICONDUCTORS
AND OTHER INTEGRATED CHIPS, AS WELL AS OTHER RELATED PRODUCTS SUCH
AS SEMICONDUCTOR CAPITAL EQUIPMENT AND MOTHERBOARDS.
---------------------------------------------------------------------
SPECIALTY PROFUND VP TECHNOLOGY: seeks daily ProFund Advisors
investment results, before fees and LLC
expenses, that correspond to the
daily performance of the Dow Jones
U.S. Technology Index (the "Index").
To meet its investment objective,
the Fund invests in equity
securities and derivatives that
ProFund Advisors believes, in
combination, should have similar
daily return characteristics as the
daily return of the Index.
---------------------------------------------------------------------
THE DOW JONES U.S. TECHNOLOGY/SM/ INDEX MEASURES THE PERFORMANCE OF
THE TECHNOLOGY SECTOR OF THE U.S. EQUITY MARKET. COMPONENT
COMPANIES INCLUDE, AMONG OTHERS, THOSE INVOLVED IN COMPUTERS AND
OFFICE EQUIPMENT, SOFTWARE, COMMUNICATIONS TECHNOLOGY,
SEMICONDUCTORS, DIVERSIFIED TECHNOLOGY SERVICES AND INTERNET
SERVICES.
---------------------------------------------------------------------
SPECIALTY PROFUND VP TELECOMMUNICATIONS: seeks ProFund Advisors
daily investment results, before LLC
fees and expenses, that correspond
to the daily performance of the Dow
Jones U.S. Telecommunications Index
(the "Index"). To meet its
investment objective, the Fund
invests in equity securities and
derivatives that ProFund Advisors
believes, in combination, should
have similar daily return
characteristics as the daily return
of the Index.
---------------------------------------------------------------------
THE DOW JONES U.S. TELECOMMUNICATIONS/SM/ INDEX MEASURES THE
PERFORMANCE OF THE TELECOMMUNICATIONS INDUSTRY OF THE U.S. EQUITY
MARKET. COMPONENT COMPANIES INCLUDE, AMONG OTHERS, FIXED-LINE
COMMUNICATIONS AND WIRELESS COMMUNICATIONS COMPANIES.
---------------------------------------------------------------------
SPECIALTY PROFUND VP UTILITIES: seeks daily ProFund Advisors
investment results, before fees and LLC
expenses, that correspond to the
daily performance of the Dow Jones
U.S. Utilities Index (the "Index").
To meet its investment objective,
the Fund invests in equity
securities that ProFund Advisors
believes, in combination, should
have similar daily return
characteristics as the daily return
of the Index.
---------------------------------------------------------------------
THE DOW JONES U.S. UTILITIES/SM/ INDEX MEASURES THE PERFORMANCE OF
THE UTILITIES SECTOR OF THE U.S. EQUITY MARKET. COMPONENT COMPANIES
INCLUDE, AMONG OTHERS, ELECTRIC UTILITIES, GAS UTILITIES AND WATER
UTILITIES.
---------------------------------------------------------------------
44
STYLE/ INVESTMENT OBJECTIVES/POLICIES PORTFOLIO
TYPE ADVISOR/
SUBADVISOR
---------------------------------------------------------------------
SPECIALTY PROFUND VP U.S. GOVERNMENT PLUS: ProFund Advisors
seeks daily investment results, LLC
before fees and expenses, that
correspond to one and one-quarter
times (1.25x) the daily movement of
the most recently issued 30-year
U.S. Treasury bond ("Long Bond"). To
meet its investment objective, the
Fund invests in U.S. Treasury
securities, money market instruments
and derivatives that ProFund
Advisors believes, in combination,
should have similar daily return
characteristics as one and
one-quarter times (1.25x) the daily
movement of the Long Bond.
---------------------------------------------------------------------
SPECIALTY PROFUND VP RISING RATES OPPORTUNITY: ProFund Advisors
seeks daily investment results, LLC
before fees and expenses, that
correspond to one and one-quarter
times the inverse (-1.25x) of the
daily price movement of the most
recently issued 30-year U.S.
Treasury bond ("Long Bond"). To meet
its investment objective, the Fund
invests in money market instruments
and derivatives that ProFund
Advisors believes, in combination,
should have similar daily return
characteristics as one and
one-quarter times the inverse
(-1.25x) of the daily movement of
the Long Bond.
---------------------------------------------------------------------
SPECIALTY ACCESS VP HIGH YIELD FUND: seeks to ProFund Advisors
provide investment results that LLC
correspond generally to the total
return of the high yield market
consistent with maintaining
reasonable liquidity. To meet its
investment objective, the Fund
invests in derivatives and money
market instruments that ProFund
Advisors believes, in combination,
should provide investment results
that correspond to the high yield
market. The Fund also may invest in
non-investment grade bonds, commonly
known as "junk bonds."
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GUGGENHEIM INVESTMENTS
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SPECIALTY RYDEX VARIABLE TRUST - NOVA FUND: Guggenheim
Seeks to provide investment results Investments
that match, before fees and
expenses, the performance of a
specific benchmark on a daily basis.
The fund's current benchmark is 150%
of the performance of the S&P 500(R)
Index. The fund does not seek to
achieve its investment objective
over a period of time greater than
one day.. If the Fund meets its
objective, the value of the Fund's
shares will tend to increase on a
daily basis by 150% of the value of
any increase in the underlying
index. When the value of the
underlying index declines, the value
of the Fund's shares should also
decrease on a daily basis by 150% of
the value of any decrease in the
underlying index (e.g., if the
underlying index goes down by 5%,
the value of the Fund's shares
should go down by 7.5% on that day).
The Nova Fund employs as its
investment strategy a program of
investing in the common stock of
companies that are generally within
the capitalization range of the
underlying index and leveraged
derivative instruments, which
primarily consist of equity index
swap agreements, futures contracts,
and options on securities, futures
contracts, and stock indices. Equity
index swaps and futures and options
contracts, if used properly, may
enable the Fund to meet its
objective by increasing the Fund's
exposure to the securities included
in the underlying index or to
securities whose performance is
highly correlated to the Fund's
benchmark. On a day-to-day basis,
the Fund may hold U.S. Government
securities or cash equivalents to
collateralize its derivative
positions. In an effort to ensure
that the Fund is fully invested on a
day-to-day basis, the Fund may
conduct any necessary trading
activity at or just prior to the
close of the U.S. financial markets.
To the extent the Fund's underlying
index is concentrated in a
particular industry the Fund will
necessarily be concentrated in that
industry. The Fund is
non-diversified and, therefore, may
invest a greater percentage of its
assets in a particular issuer in
comparison to a diversified fund.
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45
STYLE/ INVESTMENT OBJECTIVES/POLICIES PORTFOLIO
TYPE ADVISOR/
SUBADVISOR
----------------------------------------------------------------
SPECIALTY RYDEX VARIABLE TRUST - INVERSE S&P Guggenheim
500 STRATEGY FUND: Seeks to provide Investments
investment results that match,
before fees and expenses, the
performance of a specific benchmark
on a daily basis. The fund's current
benchmark is the inverse (opposite)
of the performance of the S&P 500(R)
Index. The fund does not seek to
achieve its investment objective
over a period of time greater than
one day. If the Fund meets its
objective, the value of the Fund's
shares will tend to increase during
times when the value of the
underlying index is decreasing. When
the value of the underlying index is
increasing, however, the value of
the Fund's shares should decrease on
a daily basis by an inversely
proportionate amount (e.g., if the
underlying index goes up by 5%, the
value of the Fund's shares should go
down by 5% on that day. Unlike a
traditional index fund, the Inverse
S&P 500 Strategy Fund's investment
objective is to perform exactly
opposite the underlying index, and
the Fund generally will not own the
securities included in the
underlying index. Instead, the Fund
employs as its investment strategy a
program of engaging in short sales
of securities included in the
underlying index and investing to a
significant extent in derivative
instruments, which primarily consist
of equity index swaps, futures
contracts, and options on
securities, futures contracts, and
stock indices. Equity index swaps,
short sales, and futures and options
contracts enable the Fund to pursue
its objective without selling short
each of the securities included in
the underlying index. Under normal
circumstances, the Fund will invest
at least 80% of its net assets, plus
any borrowings for investment
purposes, in financial instruments
with economic characteristics that
should perform opposite to the
securities of companies included in
the underlying index. On a
day-to-day basis, the Fund may hold
U.S. Government securities or cash
equivalents to collateralize its
short sales and derivative
positions. In an effort to ensure
that the Fund is fully invested on a
day-to-day basis, the Fund may
conduct any necessary trading
activity at or just prior to the
close of the U.S. financial markets.
To the extent the Fund's underlying
index is concentrated in a
particular industry the Fund will
necessarily be concentrated in that
industry. The Fund is
non-diversified and, therefore, may
invest a greater percentage of its
assets in a particular issuer in
comparison to a diversified fund.
----------------------------------------------------------------
SPECIALTY RYDEX VARIABLE TRUST - NASDAQ-100(R) Guggenheim
FUND: Seeks to provide investment Investments
results that correspond, before fees
and expenses, to a benchmark for
over-the-counter securities on a
daily basis. The fund's current
benchmark is the NASDAQ-100
Index(R). If the Fund meets its
objective, the value of the Fund's
shares should increase on a daily
basis by the amount of any increase
in the value of the underlying
index. However, when the value of
the underlying index declines, the
value of the Fund's shares should
also decrease on a daily basis by
the amount of the decrease in value
of the underlying index. The
NASDAQ-100(R) Fund employs as its
investment strategy a program of
investing in the common stock of
companies that are generally within
the capitalization range of the
underlying index and derivative
instruments, which primarily consist
of equity index swaps, futures
contracts, and options on
securities, futures contracts, and
stock indices. Equity index swaps
and futures and options contracts
enable the Fund to pursue its
objective without investing directly
in the securities included in the
underlying index, or in the same
proportion that those securities are
represented in the underlying index.
Under normal circumstances, the
NASDAQ-100(R) Fund will invest at
least 80% of its net assets, plus
any borrowings for investment
purposes, in securities of companies
in the underlying index and
derivatives and other instruments
whose performance is expected to
correspond to that of the underlying
index. On a day-to-day basis, the
Fund may hold U.S. Government
securities or cash equivalents to
collateralize its derivative
positions. The Fund also may invest
in American Depositary Receipts to
gain exposure to international
companies included in the underlying
index. In an effort to ensure that
the Fund is fully invested on a
day-to-day basis, the Fund may
conduct any necessary trading
activity at or just prior to the
close of the U.S. financial markets.
To the extent the Fund's underlying
index is concentrated in a
particular industry the Fund will
necessarily be concentrated in that
industry. Currently, the NASDAQ-100
Index(R) is concentrated in
technology companies. The Fund is
non- diversified and, therefore, may
invest a greater percentage of its
assets in a particular issuer in
comparison to a diversified fund.
----------------------------------------------------------------
46
STYLE/ INVESTMENT OBJECTIVES/POLICIES PORTFOLIO
TYPE ADVISOR/
SUBADVISOR
------------------------------------------------------------------------
THE PRUDENTIAL SERIES FUND
------------------------------------------------------------------------
INTER THE PRUDENTIAL SERIES FUND - SP Jennison Associates
NATIONAL INTERNATIONAL GROWTH PORTFOLIO: LLC; Marsico
EQUITY Seeks long-term growth of Capital
capital. The Portfolio invests Management, LLC;
primarily in stocks of large and William Blair &
medium-sized companies located in Company, LLC
countries around the world. Under
normal market conditions, the
portfolio invests at least 65% of
its total assets in common stock of
foreign companies operating or based
in at least five different
countries, which may include
countries with emerging markets. The
Portfolio may invest anywhere in the
world, but generally not in the U.S.
and will not concentrate investments
in any particular industry. The
Portfolio seeks companies that
historically have had above average
growth, improving profitability,
strong balance sheets, management
strength and strong market share for
its products. The Portfolio also
tries to buy such stocks at
attractive prices in relation to
their growth prospects. (see
information above regarding limited
availability of this option.)
------------------------------------------------------------------------
WELLS FARGO VARIABLE TRUST
------------------------------------------------------------------------
INTER WELLS FARGO ADVANTAGE VT Wells Fargo Funds
NATIONAL INTERNATIONAL EQUITY FUND - CLASS 1: Management, LLC,
EQUITY seeks long-term capital adviser; Wells
growth/capital appreciation. The Capital
fund normally invests at least 80% Management Inc.,
of its assets in equity securities sub-adviser
of foreign issuers, and up to 20% of
its total assets in emerging market
equity securities.
------------------------------------------------------------------------
LARGE CAP WELLS FARGO ADVANTAGE VT INTRINSIC Wells Fargo Funds
VALUE VALUE FUND - CLASS 2: seeks Management, LLC,
long-term capital appreciation. The adviser;
fund normally invests at least 80% Metropolitan West
of its assets in equity securities Capital
of large-capitalization companies, Management, Inc.,
which it defines as companies with sub-adviser
the market capitalizations within
the range of the Russell 1000(R)
Value Index. The Wells Fargo
Advantage VT Intrinsic Value Fund
can invest up to 20% of its assets
in equity securities of foreign
issuers, through ADRs and similar
investments. Furthermore, we may use
futures, options or swap agreements,
as well as other derivatives, to
manage risk or to enhance return.
------------------------------------------------------------------------
LARGE CAP WELLS FARGO ADVANTAGE VT OMEGA Wells Fargo Funds
GROWTH GROWTH FUND - CLASS 1: seeks Management, LLC,
long-term capital adviser; Wells
growth/appreciation. The fund Capital
normally invests at least 80% of its Management Inc.,
assets in equity securities of any sub-adviser
market capitalization and may invest
up to 25% of its assets in equity
securities of foreign issuers,
including ADRs and similar
investments. The Fund invests
principally in equity securities of
companies of all market
capitalizations. Furthermore, we may
use futures, options or swap
agreements, as well as other
derivatives, to manage risk or to
enhance return.
------------------------------------------------------------------------
SMALL CAP WELLS FARGO ADVANTAGE VT SMALL CAP Wells Fargo Funds
GROWTH GROWTH FUND - CLASS 1: seeks Management, LLC,
long-term capital adviser; Wells
growth/appreciation. The Fund Capital
normally invests at least 80% of its Management Inc.,
assets in equity securities of sub-adviser
small-capitalization companies that
we believe have prospects for robust
and sustainable growth of revenues
and earnings. Small-capitalization
companies are defined as those with
market capitalizations of $3 billion
or less. Furthermore, the Fund may
use futures, options, repurchase or
reverse repurchase agreements or
swap agreements, as well as other
derivatives, to manage risk or to
enhance return.
------------------------------------------------------------------------
"Dow Jones Industrial Average/SM/", "DJIA/SM/", "Dow Industrials/SM/", "The
Dow/SM/", and "The Dow 10/SM/", are service marks of Dow Jones & Company, Inc.
("Dow Jones") and have been licensed for use for certain purposes by First
Trust Advisors L.P. ("First Trust"). The portfolios, including, and in
particular the Target Managed VIP portfolio The Dow/SM/ DART 10 portfolio, and
The Dow/SM/ Target Dividend Portfolio are not endorsed, sold or promoted by
Dow Jones, and Dow Jones makes no representation regarding the advisability of
investing in such products.
"Standard & Poor's," "S&P," "S&P 500," "Standard & Poor's 500," and "500" are
trademarks of The McGraw-Hill Companies, Inc. and have been licensed for use
by First Trust on behalf of the S&P Target 24 Portfolio and the Target Managed
VIP Portfolio. The Portfolios are not sponsored, endorsed, managed, sold or
promoted by Standard & Poor's and Standard & Poor's makes no representation
regarding the advisability of investing in the Portfolio.
"The Nasdaq 100(R)", "Nasdaq-100 Index(R)", "Nasdaq Stock Market(R)", and
"Nasdaq(R)" are trade or service marks of The Nasdaq Stock Market, Inc. (which
with its affiliates are the "Corporations") and have been licensed for use by
First Trust. The Nasdaq Target 15 Portfolio and Target Managed VIP Portfolio
have not been passed on by the Corporations as to its legality or suitability.
The Nasdaq Target 15 Portfolio and Target Managed VIP Portfolio are not
issued, endorsed, sponsored, managed, sold or promoted by the Corporations.
THE CORPORATIONS MAKE NO WARRANTIES AND BEAR NO LIABILITY WITH RESPECT TO THE
NASDAQ TARGET 15 PORTFOLIO OR THE TARGET MANAGED VIP PORTFOLIO.
47
"Value Line(R)," "The Value Line Investment Survey," and "Value Line
Timeliness/TM/ Ranking System" are registered trademarks of Value Line
Securities, Inc. or Value Line Publishing, Inc. The Target Managed VIP(R)
Portfolio and Value Line Target 25 Portfolio are not sponsored, recommended,
sold or promoted by Value Line Publishing, Inc., Value Line, Inc. or Value
Line Securities, Inc. ("Value Line"). Value Line makes no representation
regarding the advisability of investing in the Portfolio.
Dow Jones has no relationship to the ProFunds VP, other than the licensing of
the Dow Jones sector indices and its service marks for use in connection with
the ProFunds VP. The ProFunds VP are not sponsored, endorsed, sold, or
promoted by Standard & Poor's or NASDAQ, and neither Standard & Poor's nor
NASDAQ makes any representations regarding the advisability of investing in
the ProFunds VP.
WHAT ARE THE FIXED ALLOCATIONS?
The Fixed Allocations consist of the MVA Fixed Allocations, the DCA Fixed Rate
Options used with our 6 or 12 Month Dollar Cost Averaging Program ("6 or 12
Month DCA Program"), the Fixed Allocations used with our dollar-cost averaging
program, and (with respect to Highest Daily Lifetime Five only), the Benefit
Fixed Rate Account. We describe the Benefit Fixed Rate Account in the section
of the prospectus concerning Highest Daily Lifetime Five. We describe the
Fixed Allocations used with our dollar cost averaging program outside of the 6
or 12 Month DCA Program in the section entitled "Do You Offer Dollar
Cost Averaging?" We no longer offer our 6 or 12 Month DCA Program.
MVA FIXED ALLOCATIONS. We offer MVA Fixed Allocations of different durations
during the accumulation period. These "MVA Fixed Allocations" earn a
guaranteed fixed rate of interest for a specified period of time, called the
"Guarantee Period." In most states, we offer MVA Fixed Allocations with
Guarantee Periods from 1 to 10 years. We may also offer special purpose MVA
Fixed Allocations for use with certain optional investment programs. We
guarantee the fixed rate for the entire Guarantee Period. However, for MVA
Fixed Allocations, if you withdraw or transfer Account Value before the end of
the Guarantee Period, we will adjust the value of your withdrawal or transfer
based on a formula, called a "Market Value Adjustment." The Market Value
Adjustment can either be positive or negative, depending on the rates that are
currently being credited on Fixed Allocations. Please refer to the section
entitled "How does the Market Value Adjustment Work?" for a description of the
formula along with examples of how it is calculated. You may allocate Account
Value to more than one Fixed Allocation at a time.
MVA Fixed Allocations are not available in Washington, Nevada, North Dakota,
Maryland and Vermont. Availability of MVA Fixed Allocations is subject to
change and may differ by state and by the annuity product you purchase. Please
call Prudential Annuities at 1-888-PRU-2888 to determine availability of MVA
Fixed Allocations in your state and for your annuity product. You may not
allocate Account Value to MVA Fixed Allocations if you have elected the
following Optional Benefits: Lifetime Five Income Benefit, Spousal Lifetime
Five Income Benefit, Highest Daily Lifetime Five Income Benefit, Highest Daily
Lifetime Seven Income Benefit, Spousal Highest Daily Lifetime Seven Income
Benefit, Highest Daily Value Death Benefit, Highest Daily Lifetime Seven with
Beneficiary Income Option, Spousal Highest Daily Lifetime Seven with
Beneficiary Income Option, Highest Daily Lifetime Seven with Lifetime Income
Accelerator, GRO, GRO Plus, GRO Plus 2008, Highest Daily GRO, Highest Daily
GRO II, GRO Plus II, Highest Daily Lifetime 7 Plus Income Benefit, Spousal
Highest Daily Lifetime 7 Plus, Highest Daily Lifetime 7 Plus with Beneficiary
Income Option, Spousal Highest Daily Lifetime 7 Plus with Beneficiary Income
Option, Highest Daily Lifetime 6 Plus, Highest Daily Lifetime 6 Plus with
Lifetime Income Accelerator, Spousal Highest Daily Lifetime 6 Plus, and
Highest Daily Lifetime 7 Plus with Lifetime Income Accelerator. The interest
rate that we credit to the MVA Fixed Allocations may be reduced by an amount
that corresponds to the asset-based charges assessed against the Sub-accounts.
No specific fees or expenses are deducted when determining the rate we credit
to an MVA Fixed Allocation. However, for some of the same reasons that we
deduct the Insurance Charge against Account Value allocated to the
Sub-accounts, we also take into consideration mortality, expense,
administration, profit and other factors in determining the interest rates we
credit to MVA Fixed Allocations, and therefore, we credit lower interest rates
due to the existence of these factors than we otherwise would. Any Tax Charge
applies to amounts that are taken from the Sub-accounts or the MVA Fixed
Allocations.
DCA FIXED RATE OPTIONS. In addition to Fixed Allocations that are subject to a
Market Value Adjustment, we offer DCA Fixed Rate Options that are used with
our 6 or 12 Month Dollar Cost Averaging Program ("6 or 12 Month DCA Program"),
and are not subject to any MVA. Account Value allocated to the DCA Fixed Rate
Options earns the declared rate of interest while it is transferred over a 6
month or 12 month period into the Sub-accounts that you have designated.
Because the interest we credit is applied against a balance that declines as
transfers are made periodically to the Sub-accounts, you do not earn interest
on the full amount that you allocated initially to the DCA Fixed Rate Options.
A dollar cost averaging program does not assure a profit, or protect against a
loss. We no longer offer our 6 or 12 Month DCA Program.
48
FEES AND CHARGES
The charges under the Annuity is designed to cover, in the aggregate, our
direct and indirect costs of selling, administering and providing benefits
under the Annuity. They are also designed, in the aggregate, to compensate us
for the risks of loss we assume. If, as we expect, the charges that we collect
from the Annuity exceeds our total costs in connection with the Annuity, we
will earn a profit. Otherwise we will incur a loss. For example, Prudential
Annuities may make a profit on the Insurance Charge if, over time, the actual
costs of providing the guaranteed insurance obligations under the Annuity are
less than the amount we deduct for the Insurance Charge. To the extent we make
a profit on the Insurance Charge, such profit may be used for any other
corporate purpose, including payment of other expenses that Prudential
Annuities incurs in promoting, distributing, issuing and administering the
Annuity.
The rates of certain of our charges have been set with reference to estimates
of the amount of specific types of expenses or risks that we will incur. In
most cases, this prospectus identifies such expenses or risks in the name of
the charge; however, the fact that any charge bears the name of, or is
designed primarily to defray a particular expense or risk does not mean that
the amount we collect from that charge will never be more than the amount of
such expense or risk, nor does it mean that we may not also be compensated for
such expense or risk out of any other charges we are permitted to deduct by
the terms of the Annuity. A portion of the proceeds that Prudential Annuities
receives from charges that apply to the Sub-accounts may include amounts based
on market appreciation of the Sub-account values.
WHAT ARE THE CONTRACT FEES AND CHARGES?
There is no contingent deferred sales charge applied if you surrender your
Annuity or make a partial withdrawal.
TRANSFER FEE: Currently, you may make twenty (20) free transfers between
investment options each Annuity Year. We currently charge $10.00 for each
transfer after the twentieth in each Annuity Year. We do not consider
transfers made as part of a Dollar Cost Averaging, Automatic Rebalancing or
asset allocation program when we count the twenty free transfers. All
transfers made on the same day will be treated as one (1) transfer. Renewals
or transfers of Account Value from a Fixed Allocation at the end of its
Guarantee Period are not subject to the Transfer Fee and are not counted
toward the twenty free transfers. Similarly, transfers made under our 6 or 12
Month Dollar Cost Averaging Program ("6 or 12 Month DCA Program") and
transfers made pursuant to a formula used with an optional benefit are not
subject to the Transfer Fee and are not counted toward the twenty free
transfers. We may reduce the number of free transfers allowable each Annuity
Year (subject to a minimum of twelve) without charging a Transfer Fee unless
you make use of electronic means to transmit your transfer requests. We may
eliminate the Transfer Fee for transfer requests transmitted electronically or
through other means that reduce our processing costs. If you are enrolled in
any program that does not permit transfer requests to be transmitted
electronically, the Transfer Fee will not be waived.
ANNUAL MAINTENANCE FEE: During the accumulation period we deduct an Annual
Maintenance Fee. The Annual Maintenance Fee is $35.00 ($30 in New York) or 2%
of your Account Value, including any amount in Fixed Allocations, whichever is
less. This fee will be deducted annually on the anniversary of the Issue Date
of your Annuity or, if you surrender your Annuity during the Annuity Year, the
fee is deducted at the time of surrender. The fee is taken out only from the
Sub-accounts. Currently, the Annual Maintenance Fee is only deducted if your
Account Value is less than $50,000 on the anniversary of the Issue Date or at
the time of surrender. We do not impose the Annual Maintenance Fee upon
annuitization or the payment of a Death Benefit. We may increase the Annual
Maintenance Fee. However, any increase will only apply to Annuities issued
after the date of the increase. For beneficiaries that elect the Beneficiary
Continuation Option, the Annual Maintenance Fee is the lesser of $30 or 2% of
Account Value. For a non-Qualified Beneficiary Continuation Option, the fee is
only applicable if the Account Value is less than $25,000 at the time the fee
is assessed.
TAX CHARGE: Several states and some municipalities charge premium taxes or
similar taxes on annuities that we are required to pay. The amount of tax will
vary from jurisdiction to jurisdiction and is subject to change. We pay the
tax either when Purchase Payments are received, upon surrender or when the
Account Value is applied under an annuity option. The tax charge is designed
to approximate the taxes that we are required to pay and is assessed as a
percentage of Purchase Payments, surrender value, or Account Value as
applicable. The tax charge currently ranges up to 3 1/2%. We reserve the right
to deduct the charge either at the time the tax is imposed, upon a full
surrender of the Annuity, or upon annuitization. We may assess a charge
against the Sub-accounts and the Fixed Allocations equal to any taxes which
may be imposed upon the separate accounts.
We will pay company income taxes on the taxable corporate earnings created by
this separate account product. While we may consider company income taxes when
pricing our products, we do not currently include such income taxes in the tax
charges you pay under the Annuity. We will periodically review the issue of
charging for these taxes and may impose a charge in the future.
In calculating our corporate income tax liability, we derive certain corporate
income tax benefits associated with the investment of company assets,
including separate account assets, which are treated as company assets under
applicable income tax law. These benefits reduce our overall corporate income
tax liability. Under current law, such benefits may include foreign tax
credits and corporate dividends received deductions. We do not pass these tax
benefits through to holders of the separate account annuity contracts because
(i) the contract owners are not the owners of the assets generating these
benefits under applicable income tax law and (ii) we do not currently include
company income taxes in the tax charges you pay under the contract.
49
INSURANCE CHARGE: We deduct an Insurance Charge daily. The charge is assessed
against the daily assets allocated to the Sub-accounts and is equal to the
amount indicated under "Summary of Contract Fees & Charges". The Insurance
Charge is the combination of the Mortality & Expense Risk Charge and the
Administration Charge. The Insurance Charge is intended to compensate
Prudential Annuities for providing the insurance benefits under the Annuity,
including the Annuity's basic Death Benefit that provides guaranteed benefits
to your beneficiaries even if the market declines and the risk that persons we
guarantee annuity payments to will live longer than our assumptions. The
charge also covers administrative costs associated with providing the Annuity
benefits, including preparation of the contract and prospectus, confirmation
statements, annual account statements and annual reports, legal and accounting
fees as well as various related expenses. Finally, the charge covers the risk
that our assumptions about the mortality risks and expenses under this Annuity
are incorrect and that we have agreed not to increase these charges over time
despite our actual costs. We may increase the portion of the total Insurance
Charge that is deducted for administrative costs; however, any increase will
only apply to Annuities issued after the date of the increase.
The Insurance Charge is not deducted against assets allocated to a Fixed
Allocation. However, for some of the same reasons that we deduct the Insurance
Charge against Account Value allocated to the Sub-accounts, we also take into
consideration mortality, expense, administration, profit and other factors in
determining the interest rates we credit to Fixed Allocations or the DCA Fixed
Rate Option, and therefore, we credit lower interest rates due to the
existence of these factors than we otherwise would.
OPTIONAL BENEFITS FOR WHICH WE ASSESS A CHARGE: If you elect to purchase
certain optional benefits, we will deduct an additional charge. For some
optional benefits, the charge is deducted from your Account Value allocated to
the Sub-accounts. This charge is included in the daily calculation of the Unit
Price for each Sub-account. For certain other optional benefits, such as
Highest Daily Lifetime 6 Plus and DCA Fixed Rate Options, the charge is
assessed against the greater of Account Value and Protected Withdrawal Value
and taken out of the Sub-accounts periodically. Please refer to the section
entitled "Summary of Contract Fees and Charges" for the list of charges for
each optional benefit.
SETTLEMENT SERVICE CHARGE: If your beneficiary takes the death benefit under a
Beneficiary Continuation Option, we deduct a Settlement Service Charge,
although the Insurance Charge no longer applies. The charge is assessed daily
against the assets allocated to the Sub-accounts and is equal to an annual
charge of 1.00% for non-qualified Annuities and 1.40% for qualified Annuities.
FEES AND EXPENSES INCURRED BY THE PORTFOLIOS: Each Portfolio incurs total
annual operating expenses comprised of an investment management fee, other
expenses and any distribution and service (12b-1) fees that may apply. These
fees and expenses are reflected daily by each Portfolio before it provides
Prudential Annuities with the net asset value as of the close of business each
Valuation Day. More detailed information about fees and expenses can be found
in the prospectuses for the Portfolios.
WHAT CHARGES APPLY TO THE FIXED ALLOCATIONS?
No specific fees or expenses are deducted when determining the rate we credit
to a Fixed Allocation. However, for some of the same reasons that we deduct
the Insurance Charge against Account Value allocated to the Sub-accounts, we
also take into consideration mortality, expense, administration, profit and
other factors in determining the interest rates we credit to Fixed
Allocations, and therefore, we credit lower interest rates due to the
existence of these factors than we otherwise would. Any Tax Charge applies to
amounts that are taken from the Sub-accounts or the Fixed Allocations. A
Market Value Adjustment may also apply to transfers, certain withdrawals,
surrender or annuitization from a MVA Fixed Allocation.
WHAT CHARGES APPLY IF I CHOOSE AN ANNUITY PAYMENT OPTION?
If you select a fixed payment option, the amount of each fixed payment will
depend on the Account Value of your Annuity when you elected to annuitize.
There is no specific charge deducted from these payments; however, the amount
of each annuity payment reflects assumptions about our insurance expenses. If
you select a variable payment option that we may offer, then the amount of
your benefits will reflect changes in the value of your Annuity and will be
subject to charges that apply under the variable immediate annuity option.
Also a tax charge may apply (see "Tax Charge" above). Currently, we only offer
fixed payment options.
EXCEPTIONS/REDUCTIONS TO FEES AND CHARGES
We may reduce or eliminate certain fees and charges or alter the manner in
which the particular fee or charge is deducted. For example, we may reduce or
eliminate the amount of the Annual Maintenance Fee or reduce the portion of
the total Insurance Charge that is deducted as an Administration Charge.
Generally, these types of changes will be based on a reduction to our sales,
maintenance or administrative expenses due to the nature of the individual or
group purchasing the Annuity. Some of the factors we might consider in making
such a decision are: (a) the size and type of group; (b) the number of
Annuities purchased by an Owner; (c) the amount of Purchase Payments or
likelihood of additional Purchase Payments; (d) whether an annuity is
reinstated pursuant to our rules; and/or (e) other transactions where sales,
maintenance or administrative expenses are likely to be reduced. We will not
discriminate unfairly between Annuity purchasers if and when we reduce any
fees and charges.
50
PURCHASING YOUR ANNUITY
WHAT ARE OUR REQUIREMENTS FOR PURCHASING THE ANNUITY?
This Annuity is designed for sale solely in connection with investment
advisory services provided by an Advisor.
INITIAL PURCHASE PAYMENT: We no longer allow new purchases of this Annuity.
However, if you decided to make payments under a systematic investment or an
electronic funds transfer program, we would have accepted a lower initial
Purchase Payment provided that, within the first Annuity Year, your subsequent
purchase payments plus your initial Purchase Payment totaled the minimum
initial Purchase Payment amount required for the Annuity purchased.
We must approve any initial and additional Purchase Payments where the total
amount of Purchase Payments equal $1,000,000 or more with respect to this
Annuity and any other annuities you are purchasing from us (or that you
already own) and/or our affiliates. To the extent allowed by state law, that
required approval also will apply to a proposed change of owner of the
Annuity, if as a result of the ownership change, total Purchase Payments would
equal or exceed that $1 million threshold. We may apply certain limitations,
restrictions, and/or underwriting standards as a condition of our issuance of
an Annuity and/or acceptance of Purchase Payments. In addition, we may apply
certain limitations and/or restrictions on an Annuity as a condition of our
acceptance, including limiting the liquidity features or the Death Benefit
protection provided under an Annuity, changing the number of transfers
allowable under an Annuity or restricting the Sub-accounts or Fixed
Allocations that are available. Other limitations and/or restrictions may
apply.
Speculative Investing - Do not purchase this Annuity if you, anyone acting on
your behalf, and/or anyone providing advice to you plan to use it, or any of
its riders, for speculation, arbitrage, viatication or any other type of
collective investment scheme now or at any time prior to termination of the
Annuity. Your Annuity may not be traded on any stock exchange or secondary
market. By purchasing this Annuity, you represent and warrant that you are not
using this Annuity, or any of its riders, for speculation, arbitrage,
viatication or any other type of collective investment scheme.
Currently, we will not issue an Annuity, permit changes in ownership or allow
assignments to certain ownership types, including but not limited to:
corporations, partnerships, endowments and grantor trusts with multiple
grantors. Further, we will only issue an Annuity, allow changes of ownership
and/or permit assignments to certain ownership types if the Annuity is held
exclusively for the benefit of the designated annuitant. These rules are
subject to state law. Additionally, we will not permit election or re-election
of any optional death benefit or optional living benefit by certain ownership
types. We may issue an Annuity in ownership structures where the annuitant is
also the participant in a Qualified or Non-Qualified employer sponsored plan
and the Annuity represents his or her segregated interest in such plan. We
reserve the right to further limit, restrict and/or change to whom we will
issue an Annuity in the future, to the extent permitted by state law. Further,
please be aware that we do not provide administration for employer-sponsored
plans and may also limit the number of plan participants that elect to use our
Annuity as a funding vehicle.
Applicable laws designed to counter terrorists and prevent money laundering
might, in certain circumstances, require us to block a contract owner's
ability to make certain transactions, and thereby refuse to accept Purchase
Payments or requests for transfers, partial withdrawals, total withdrawals,
death benefits, or income payments until instructions are received from the
appropriate regulator. We also may be required to provide additional
information about you and your Annuity to government regulators.
Except as noted below, Purchase Payments must be submitted by check drawn on a
U.S. bank, in U.S. dollars, and made payable to Prudential Annuities. Purchase
Payments may also be submitted via 1035 exchange or direct transfer of funds.
Under certain circumstances, Purchase Payments may be transmitted to
Prudential Annuities via wiring funds through your Financial Professional's
broker-dealer firm. Additional Purchase Payments may also be applied to your
Annuity under an electronic funds transfer arrangement where you authorize us
to deduct money directly from your bank account. We may reject any payment if
it is received in an unacceptable form. Our acceptance of a check is subject
to our ability to collect funds.
AGE RESTRICTIONS: There is no age restriction to purchase the Annuity.
However, the basic Death Benefit provides greater protection for persons under
age 85. There is no Contingent Deferred Sales Charge deducted upon surrender
or partial withdrawal. If you take a distribution prior to age 59 1/2, you may
be subject to a 10% penalty in addition to ordinary income taxes on any gain.
The availability and level of protection of certain optional benefits may vary
based on the age of the Owner as of the Issue Date of the Annuity or the date
of the Owner's death.
"BENEFICIARY" ANNUITY
You may purchase an Annuity if you are a beneficiary of an annuity that was
owned by a decedent, subject to the following requirements. You may transfer
the proceeds of the decedent's annuity into the Annuity described in this
Prospectus and continue receiving the distributions that are required by the
tax laws. This transfer option is only available for purchase of an IRA, Roth
IRA, or a non-qualified annuity, for distributions based on lives age 70 or
under. This transfer option is also not available if the proceeds are being
transferred from an annuity issued by us or one of our affiliates and the
annuity offers a "Beneficiary Continuation Option".
Upon purchase, the Annuity will be issued in the name of the decedent for your
benefit. You must take required distributions at least annually, which we will
calculate based on the applicable life expectancy in the year of the
decedent's death, using Table 1 in IRS Publication 590.
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For IRAs and Roth IRAs, distributions must begin by December 31 of the year
following the year of the decedent's death. If you are the surviving spouse
beneficiary, distributions may be deferred until the decedent would have
attained age 70 1/2, however if you choose to defer distributions, you are
responsible for complying with the distribution requirements under the Code,
and you must notify us when you would like distributions to begin. For
additional information regarding the tax considerations applicable to
beneficiaries of an IRA or Roth IRA, see "Required Distributions Upon Your
Death for Qualified Annuity Contracts" in the Tax Considerations section of
this prospectus.
For non-qualified Annuities, distributions must begin within one year of the
decedent's death. For additional information regarding the tax considerations
applicable to beneficiaries of a non-qualified Annuity see "Required
Distributions Upon Your Death for Nonqualified Annuity Contracts" in the Tax
Consideration section of your prospectus.
You may choose to take more than your required distributions. You may take
withdrawals in excess of your required distributions. Any withdrawals reduce
the required distribution for the year. All applicable charges will be
assessed against your Annuity, such as the Insurance Charge and the Annual
Maintenance Fee.
The Annuity may provide a basic Death Benefit upon death, and you may name
"successors" who may either receive the Death Benefit as a lump sum or
continue receiving distributions after your death under the Beneficiary
Continuation Option.
Please note the following additional limitations for a Beneficiary Annuity:
.. No additional Purchase Payments are permitted. You may only make a one-time
initial Purchase Payment transferred to us directly from another annuity or
eligible account. You may not make your Purchase Payment as an indirect
rollover, or combine multiple "Transfer of Assets" or "TOA's" into a single
contract as part of this "Beneficiary" Annuity.
.. You may not elect any optional living or death benefits.
.. You may not annuitize the Annuity; no annuity options are available.
.. You may participate only in the following programs: Auto-Rebalancing,
Dollar Cost Averaging (but not 6 or 12 Month Dollar Cost Averaging),
Systematic Withdrawals, and Third Party Investment Advisor.
.. You may not assign or change ownership of the Annuity, and you may not
change or designate another life upon which distributions are based. A
"beneficiary annuity" may not be co-owned.
.. If the Annuity is funded by means of transfer from another "Beneficiary
Annuity" with another company, we require that the sending company or the
beneficial owner provide certain information in order to ensure that
applicable required distributions have been made prior to the transfer of
the contract proceeds to us. We further require appropriate information to
enable us to accurately determine future distributions from the Annuity.
Please note we are unable to accept a transfer of another "Beneficiary
Annuity" where taxes are calculated based on an exclusion amount or an
exclusion ratio of earnings to original investment. We are also unable to
accept a transfer of an annuity that has annuitized.
.. The beneficial owner of the Annuity can be an individual, grantor trust,
or, for an IRA or Roth IRA, a qualified trust. In general, a qualified
trust (1) must be valid under state law; (2) must be irrevocable or became
irrevocable by its terms upon the death of the IRA or Roth IRA owner; and
(3) the beneficiaries of the trust who are beneficiaries with respect to
the trust's interest in this Annuity must be identifiable from the trust
instrument and must be individuals. A qualified trust must provide us with
a list of all beneficiaries to the trust (including contingent and
remainder beneficiaries with a description of the conditions on their
entitlement), all of whom must be individuals, as of September 30/th/ of
the year following the year of death of the IRA or Roth IRA owner, or date
of Annuity application if later. The trustee must also provide a copy of
the trust document upon request. If the beneficial owner of the Annuity is
a grantor trust, distributions must be based on the life expectancy of the
grantor. If the beneficial owner of the Annuity is a qualified trust,
distributions must be based on the life expectancy of the oldest
beneficiary under the trust.
.. If this Beneficiary Annuity is transferred to another company as a tax-free
exchange with the intention of qualifying as a beneficiary annuity with the
receiving company, we may require certifications from the receiving company
that required distributions will be made as required by law.
.. If you are transferring proceeds as beneficiary of an annuity that is owned
by a decedent, we must receive your transfer request at least 45 days prior
to your first required distribution. If, for any reason, your transfer
request impedes our ability to complete your first distribution by the
required date, we will be unable to accept your transfer request.
OWNER, ANNUITANT AND BENEFICIARY DESIGNATIONS: We will ask you to name the
Owner(s), Annuitant and one or more Beneficiaries for your Annuity.
. Owner: The Owner(s) holds all rights under the Annuity. You may name up
to two Owners in which case all ownership rights are held jointly.
Generally joint owners are required to act jointly; however, if each
owner provides us with an instruction that we find acceptable, we will
permit each owner to act independently on behalf of both owners. All
information and documents that we are required to send you will be sent
to the first named owner. This Annuity does not provide a right of
survivorship. Refer to the Glossary of Terms for a complete description
of the term "Owner."
. Annuitant: The Annuitant is the person upon whose life we continue to
make annuity payments. You must name an Annuitant who is a natural
person. We do not accept a designation of joint Annuitants during the
accumulation period. In limited circumstances and where allowed by law,
you may name one or more Contingent Annuitants. Generally, a Contingent
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Annuitant will become the Annuitant if the Annuitant dies before the
Annuity Date. Please refer to the discussion of "Considerations for
Contingent Annuitants" in the Tax Considerations section of the
Prospectus. For Beneficiary Annuities instead of an Annuitant there is a
"Key Life" which is used to determine the annual required distributions.
. Beneficiary: The Beneficiary is the person(s) or entity you name to
receive the Death Benefit. Your Beneficiary Designation should be the
exact name of your beneficiary, not only a reference to the
beneficiary's relationship to you. If you use a designation of
"surviving spouse" we will pay the Death Benefit to the individual that
is your spouse at the time of your death (as defined under the federal
tax laws and regulations). If no beneficiary is named the Death Benefit
will be paid to you or your estate.
Your right to make certain designations may be limited if your Annuity is to
be used as an IRA, Beneficiary Annuity other "qualified" investment that is
given beneficial tax treatment under the Code. You should seek competent tax
advice on the income, estate and gift tax implications of your designations.
For Beneficiary Annuities, instead of a Beneficiary, the term "Successor" is
used.
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MANAGING YOUR ANNUITY
MAY I CHANGE THE OWNER, ANNUITANT AND BENEFICIARY DESIGNATIONS?
In general, you may change the Owner, Annuitant and Beneficiary Designations
by sending us a request in writing in a form acceptable to us. However, if the
Annuity is held as a Beneficiary Annuity, the Owner may not be changed and you
may not designate another KeyLife upon which distributions are based. Upon an
ownership change, including an assignment, any automated investment or
withdrawal program will be canceled. The new owner must submit the applicable
program enrollment if they wish to participate in such a program. Where
allowed by law, such changes will be subject to our acceptance. Some of the
changes we will not accept include, but are not limited to:
. a new Owner subsequent to the death of the Owner or the first of any
joint Owners to die, except where a spouse Beneficiary has become the
Owner as a result of an Owner's death;
. a new Annuitant subsequent to the Annuity Date;
. for "non-qualified" investments, a new Annuitant prior to the Annuity
Date if the Annuity is owned by an entity;
. a change in Beneficiary if the Owner had previously made the designation
irrevocable;
. a new Owner or Annuitant that is a certain ownership type, including but
not limited to corporations, partnerships, endowments, and grantor
trusts with multiple grantors; and
. a new Annuitant for a contract issued to a grantor trust where the new
Annuitant is not the grantor of the trust.
There are also restrictions on designation changes when you have elected
certain optional benefits. See the "Living Benefits" and "Death Benefits"
sections of this Prospectus for any such restrictions.
If you wish to change the Owner and/or Beneficiary under the Annuity, or to
assign the Annuity, you must deliver the request to us in writing at our
Service Office. Generally, any change of Owner and/or Beneficiary, or
assignment of the Annuity, will take effect when accepted and recorded by us
(unless an alternative rule is stipulated by applicable State law). WE WILL
ALLOW CHANGES OF OWNERSHIP AND/OR ASSIGNMENTS ONLY IF THE ANNUITY IS HELD
EXCLUSIVELY FOR THE BENEFIT OF THE DESIGNATED ANNUITANT. WE ARE NOT
RESPONSIBLE FOR ANY TRANSACTIONS PROCESSED BEFORE A CHANGE OF OWNER AND/OR
BENEFICIARY, AND AN ASSIGNMENT OF THE ANNUITY, IS ACCEPTED AND RECORDED BY US.
UNLESS PROHIBITED BY APPLICABLE STATE LAW, WE RESERVE THE RIGHT TO REFUSE A
PROPOSED CHANGE OF OWNER AND/OR BENEFICIARY, AND A PROPOSED ASSIGNMENT OF THE
ANNUITY, AT ANY TIME ON A NON-DISCRIMINATORY BASIS, AND TO THE EXTENT ALLOWED
BY STATE LAW, AND WE ARE NOT OBLIGATED TO PROCESS YOUR REQUEST WITHIN ANY
PARTICULAR TIME FRAME. For New York Annuities, a request to change the Owner,
Annuitant, Contingent Annuitant, Beneficiary and contingent Beneficiary
designations is effective when signed, and an assignment is effective upon our
receipt. We assume no responsibility for the validity or tax consequences of
any change of Owner and/or Beneficiary or any assignment of the Annuity, and
may be required to make reports of ownership changes and/or assignments to the
appropriate federal, state and/or local taxing authorities. You should consult
with a qualified tax advisor for complete information and advice prior to any
ownership change or assignment. Once an ownership change or assignment is
processed, the tax reporting cannot be reversed.
DEATH BENEFIT SUSPENSION UPON CHANGE OF OWNER OR ANNUITANT. If there is a
change of Owner or Annuitant, the change may affect the amount of the Death
Benefit. See the Death Benefit section of this prospectus for additional
details.
SPOUSAL DESIGNATIONS
If an Annuity is co-owned by spouses, we will assume that the sole primary
Beneficiary is the surviving spouse that was named as the co-owner unless you
elect an alternative Beneficiary Designation. Unless you elect an alternative
Beneficiary Designation, upon the death of either spousal Owner, the surviving
spouse may elect to assume ownership of the Annuity instead of taking the
Death Benefit payment. The Death Benefit that would have been payable will be
the new Account Value of the Annuity as of the date of due proof of death and
any required proof of a spousal relationship. As of the date the assumption is
effective, the surviving spouse will have all the rights and benefits that
would be available under the Annuity to a new purchaser of the same attained
age. For purposes of determining any future Death Benefit for the beneficiary
of the surviving spouse, the new Account Value will be considered as the
initial Purchase Payment. However, any additional Purchase Payments applied
after the date the assumption is effective will be subject to all provisions
of the Annuity.
Spousal assumption is also permitted, subject to our rules and regulatory
approval, if the Annuity is held by a custodial account established to hold
retirement assets for the benefit of the natural person Annuitant pursuant to
the provisions of Section 408(a) of the Internal Revenue Code ("Code") or any
successor Code section thereto) ("Custodial Account") and, on the date of the
Annuitant's death, the spouse of the Annuitant is (1) the Contingent Annuitant
under the Annuity and (2) the beneficiary of the Custodial Account. The
ability to continue the Annuity in this manner will result in the Annuity no
longer qualifying for tax deferral under the Internal Revenue Code. However,
such tax deferral should result from the ownership of the Annuity by the
Custodial Account. Please consult your tax or legal adviser.
Certain spousal rights under the contract, and our administration of such
spousal rights and related tax reporting comport with our understanding of the
Defense of Marriage Act (which defines a "marriage" as a legal union between a
man and a woman and a "spouse" as a person of the opposite sex). Depending on
the state in which your annuity was issued, we may offer certain spousal
benefits to civil union couples, domestic partners or same-sex marriages. You
should be aware, however, that federal tax law does
54
not recognize civil union couples, domestic partners or marriage spouses of
the same sex. Therefore, we cannot permit a same-sex civil union partner,
domestic partner or spouse to continue the annuity within the meaning of the
tax law upon the death of the first partner under the annuity's "spousal
continuance" provision. Please note there may be federal tax consequences at
the death of the first same-sex civil union partner, domestic partner or
spouse. Civil union couples, domestic partners and spouses of the same sex
should consider that limitation before selecting a spousal benefit under the
annuity.
CONTINGENT ANNUITANT
Generally, if an Annuity is owned by an entity and the entity has named a
Contingent Annuitant, the Contingent Annuitant will become the Annuitant upon
the death of the Annuitant, and no Death Benefit is payable. Unless we agree
otherwise, the Annuity is only eligible to have a Contingent Annuitant
designation if the entity which owns the Annuity is (1) a plan described in
Internal Revenue Code Section 72(s)(5)(A)(i) (or any successor Code section
thereto); (2) an entity described in Code Section 72(u)(1) (or any successor
Code section thereto); or (3) a Custodial Account, as described in the above
section.
Where the Annuity is held by a Custodial Account, the Contingent Annuitant
will not automatically become the Annuitant upon the death of the Annuitant.
Upon the death of the Annuitant, the Custodial Account will have the choice,
subject to our rules, to either elect to receive the Death Benefit or elect to
continue the Annuity. If the Custodial Account elects to receive the Death
Benefit, the Account Value of the Annuity as of the date of due proof of death
of the Annuitant will reflect the amount that would have been payable had a
Death Benefit been paid. See the section above entitled "Spousal Designations"
for more information about how the Annuity can be continued by a Custodial
Account.
MAY I RETURN MY ANNUITY IF I CHANGE MY MIND?
If after purchasing your Annuity you change your mind and decide that you do
not want it, you may return it to us within a certain period of time known as
a right to cancel period. This is often referred to as a "free look."
Depending on the state in which you purchased your Annuity, and, in some
states, if you purchased the Annuity as a replacement for a prior contract,
the right to cancel period may be ten (10) days, or longer, measured from the
time that you received your Annuity. If you return your Annuity, during the
applicable period, we will refund your current Account Value plus any tax
charge deducted, less any applicable federal and state income tax withholding
and depending on your state's requirements, any applicable insurance charges
deducted. The amount returned to you may be higher or lower than the Purchase
Payment(s) applied during the right to cancel period and may be subject to a
market value adjustment if it was allocated to a MVA Fixed Allocation, to the
extent allowed by State law.
MAY I MAKE ADDITIONAL PURCHASE PAYMENTS?
Unless we agree otherwise and subject to our rules, the minimum amount that we
accept as an additional Purchase Payment is $100 unless you participate in
Prudential Annuities Systematic Investment Plan or a periodic Purchase Payment
program. Purchase Payments made while you participate in an asset allocation
program will be allocated in accordance with such benefit. Additional Purchase
Payments may be made at any time before the Annuity Date (unless the Annuity
is held as a Beneficiary Annuity), or prior to the Account Value being reduced
to zero. Purchase Payments are not permitted if the Annuity is held as a
Beneficiary Annuity. Additional Purchase Payments are not permitted in certain
states.
MAY I MAKE SCHEDULED PAYMENTS DIRECTLY FROM MY BANK ACCOUNT?
You can make additional Purchase Payments to your Annuity by authorizing us to
deduct money directly from your bank account and applying it to your Annuity
(unless your Annuity is being held as a Beneficiary Annuity). We call our
electronic funds transfer program "The Systematic Investment Plan." Purchase
Payments made through electronic funds transfer may only be allocated to the
Sub-accounts when applied. Different allocation requirements may apply in
connection with certain optional benefits. We may allow you to invest in your
Annuity with a lower initial Purchase Payment, as long as you authorize
payments through an electronic funds transfer that will equal at least the
minimum Purchase Payment set forth above during the first 12 months of your
Annuity. We may suspend or cancel electronic funds transfer privileges if
sufficient funds are not available from the applicable financial institution
on any date that a transaction is scheduled to occur.
MAY I MAKE PURCHASE PAYMENTS THROUGH A SALARY REDUCTION PROGRAM?
These types of programs are only available with certain types of qualified
investments. If your employer sponsors such a program, we may agree to accept
periodic Purchase Payments through a salary reduction program as long as the
allocations are made only to Sub-accounts and the periodic Purchase Payments
received in the first year total at least $5,000.
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MANAGING YOUR ACCOUNT VALUE
HOW AND WHEN ARE PURCHASE PAYMENTS INVESTED?
(See "Valuing Your Investment" for a description of our procedure for pricing
initial and subsequent Purchase Payments.)
INITIAL PURCHASE PAYMENT: Once we accept your application, we invest your
Purchase Payment in the Annuity according to your instructions for allocating
your Account Value. The Purchase Payment is your initial Purchase Payment
minus any tax charges that may apply. You can allocate Purchase Payments to
one or more available Sub-accounts or available Fixed Allocations. Investment
restrictions will apply if you elect certain optional benefits.
SUBSEQUENT PURCHASE PAYMENTS: Unless you participate in an asset allocation
program, or unless you have provided us with other specific allocation
instructions for one, more than one, or all subsequent Purchase Payments, we
will allocate any additional Purchase Payments you make according to your
initial Purchase Payment allocation instructions. If you so instruct us, we
will allocate subsequent Purchase Payments according to any new allocation
instructions. Unless you tell us otherwise, Purchase Payments made while you
participate in an asset allocation program will be allocated in accordance
with such program.
ARE THERE RESTRICTIONS OR CHARGES ON TRANSFERS BETWEEN INVESTMENT OPTIONS?
During the accumulation period you may transfer Account Value between
investment options subject to the restrictions outlined below. Transfers are
not subject to taxation on any gain. You may not transfer Account Value to any
Fixed Allocation used with a dollar cost averaging program or any DCA Fixed
Rate Options. You may only allocate Purchase Payments to Fixed Allocations
used with a dollar cost averaging program or the DCA Fixed Rate Options.
Currently, any transfer involving the Rydex or ProFunds VP Sub-accounts must
be received by us no later than 3:00 p.m. Eastern time (or one hour prior to
any announced closing of the applicable securities exchange) to be processed
on the current Valuation Day. The "cut-off" time for such financial
transactions involving a Rydex or ProFunds VP Sub-account will be extended to
1/2 hour prior to any announced closing (generally, 3:30 p.m. Eastern time)
for transactions submitted electronically, including through Prudential
Annuities Internet website (www.prudentialannuities.com). Owners attempting to
process a purchase order or transfer request between the applicable "cut-off"
time and 4:00 p.m., are informed that their transactions cannot be processed
as requested.
Currently, we charge $10.00 for each transfer after the twentieth
(20/th/) transfer in each Annuity Year. Transfers made as part of a Dollar
Cost Averaging (including 6 or 12 Month Dollar Cost Averaging Program),
Automatic Rebalancing or asset allocation program do not count toward the
twenty free transfer limit. Renewals or transfers of Account Value from a MVA
Fixed Allocation at the end of its Guarantee Period are not subject to the
transfer charge. We may reduce the number of free transfers allowable each
Annuity Year (subject to a minimum of twelve) without charging a Transfer Fee.
We may also increase the Transfer Fee that we charge to $15.00 for each
transfer after the number of free transfers has been used up. We may eliminate
the Transfer Fee for transfer requests transmitted electronically or through
other means that reduce our processing costs. If enrolled in any program that
does not permit transfer requests to be transmitted electronically, the
Transfer Fee will not be waived.
Once you have made 20 transfers among the Sub-accounts during an Annuity Year,
we will accept any additional transfer request during that year only if the
request is submitted to us in writing with an original signature and otherwise
is in good order. For purposes of this 20 transfer limit, we (i) do not view a
facsimile transmission as a "writing", (ii) will treat multiple transfer
requests submitted on the same Valuation Day as a single transfer, and
(iii) do not count any transfer that solely involves Sub-accounts
corresponding to any ProFund Portfolio and/or Rydex Portfolio and/or the AST
Money Market Portfolio, or any transfer that involves one of our systematic
programs, such as asset allocation and automated withdrawals.
Frequent transfers among Sub-accounts in response to short-term fluctuations
in markets, sometimes called "market timing," can make it very difficult for a
Portfolio manager to manage a Portfolio's investments. Frequent transfers may
cause the Portfolio to hold more cash than otherwise necessary, disrupt
management strategies, increase transaction costs, or affect performance. The
Annuity offers Sub-accounts designed for Owners who wish to engage in frequent
transfers (i.e., one or more of the Sub-accounts corresponding to the ProFund
Portfolios, the Rydex Portfolios and the AST Money Market Portfolio), and we
encourage Owners seeking frequent transfers to utilize those Sub-accounts.
In light of the risks posed to Owners and other investors by frequent
transfers, we reserve the right to limit the number of transfers in any
Annuity Year for all existing or new Owners and to take the other actions
discussed below. We also reserve the right to limit the number of transfers in
any Annuity Year or to refuse any transfer request for an Owner or certain
Owners if: (a) we believe that excessive transfer activity (as we define it)
or a specific transfer request or group of transfer requests may have a
detrimental effect on Unit Values or the share prices of the Portfolios; or
(b) we are informed by a Portfolio (e.g., by the Portfolio's portfolio
manager) that the purchase or redemption of shares in the Portfolio must be
restricted because the Portfolio believes the transfer activity to which such
purchase and redemption relates would have a detrimental effect on the share
prices of the affected Portfolio. Without limiting the above, the most likely
scenario where either of the above could occur would be if the aggregate
amount of a trade or trades represented a relatively large proportion of the
total assets of a particular Portfolio. In furtherance of our general
56
authority to restrict transfers as described above, and without limiting other
actions we may take in the future, we have adopted the following specific
restrictions:
.. With respect to each Sub-account (other than the AST Money Market
Sub-account, or a Sub-account corresponding to a ProFund Portfolio or a
Rydex Portfolio), we track amounts exceeding a certain dollar threshold
that were transferred into the Sub-account. If you transfer such amount
into a particular Sub-account, and within 30 calendar days thereafter
transfer (the "Transfer Out") all or a portion of that amount into another
Sub-account, then upon the Transfer Out, the former Sub-account becomes
restricted (the "Restricted Sub-account"). Specifically, we will not permit
subsequent transfers into the Restricted Sub-account for 90 calendar days
after the Transfer Out if the Restricted Sub-account invests in a
non-international Portfolio, or 180 calendar days after the Transfer Out if
the Restricted Sub-account invests in an international Portfolio. For
purposes of this rule, we (i) do not count transfers made in connection
with one of our systematic programs, such as asset allocation and automated
withdrawals; (ii) do not count any transfer that solely involves
Sub-accounts corresponding to any ProFund Portfolio and/or Rydex Portfolio
and/or the AST Money Market Portfolio; and (iii) do not categorize as a
transfer the first transfer that you make after the Issue Date, if you make
that transfer within 30 calendar days after the Issue Date. Even if an
amount becomes restricted under the foregoing rules, you are still free to
redeem the amount from your Annuity at any time.
.. We reserve the right to effect exchanges on a delayed basis for all
contracts. That is, we may price an exchange involving the Sub-accounts on
the Valuation Day subsequent to the Valuation Day on which the exchange
request was received. Before implementing such a practice, we would issue a
separate written notice to Owners that explains the practice in detail.
If we deny one or more transfer requests under the foregoing rules, we will
inform you or your Financial Professional promptly of the circumstances
concerning the denial.
Contract owners in New York who purchased their contracts prior to March 15,
2004 are not subject to the specific restrictions outlined in bulleted
paragraphs immediately above. In addition, there are contract owners of
different variable annuity contracts that are funded through the same Separate
Account that are not subject to the above-referenced transfer restrictions
and, therefore, might make more numerous and frequent transfers than contract
owners who are subject to such limitations. Finally, there are contract owners
of other variable annuity contracts or variable life contracts that are issued
by Prudential Annuities as well as other insurance companies that have the
same underlying mutual fund portfolios available to them. Since some contract
owners are not subject to the same transfer restrictions, unfavorable
consequences associated with such frequent trading within the underlying
mutual fund (e.g., greater portfolio turnover, higher transaction costs, or
performance or tax issues) may affect all contract owners. Similarly, while
contracts managed by a Financial Professional or third party investment
advisor are subject to the restrictions on transfers between investment
options that are discussed above, if the advisor manages a number of contracts
in the same fashion unfavorable consequences may be associated with management
activity since it may involve the movement of a substantial portion of an
underlying mutual fund's assets which may affect all contract owners invested
in the affected options. Apart from jurisdiction-specific and contract
differences in transfer restrictions, we will apply these rules uniformly
(including contracts managed by a Financial Professional or third party
investment advisor), and will not waive a transfer restriction for any
contract owner.
ALTHOUGH OUR TRANSFER RESTRICTIONS ARE DESIGNED TO PREVENT EXCESSIVE
TRANSFERS, THEY ARE NOT CAPABLE OF PREVENTING EVERY POTENTIAL OCCURRENCE OF
EXCESSIVE TRANSFER ACTIVITY.
The Portfolios have adopted their own policies and procedures with respect to
excessive trading of their respective shares, and we reserve the right to
enforce any such current or future policies and procedures. The prospectuses
for the Portfolios describe any such policies and procedures, which may be
more or less restrictive than the policies and procedures we have adopted.
Under SEC rules, we are required to: (1) enter into a written agreement with
each Portfolio or its principal underwriter or its transfer agent that
obligates us to provide to the Portfolio promptly upon request certain
information about the trading activity of individual contract owners
(including an Annuity Owner's TIN number), and (2) execute instructions from
the Portfolio to restrict or prohibit further purchases or transfers by
specific contract owners who violate the excessive trading policies
established by the Portfolio. In addition, you should be aware that some
Portfolios may receive "omnibus" purchase and redemption orders from other
insurance companies or intermediaries such as retirement plans. The omnibus
orders reflect the aggregation and netting of multiple orders from individual
owners of variable insurance contracts and/or individual retirement plan
participants. The omnibus nature of these orders may limit the Portfolios in
their ability to apply their excessive trading policies and procedures. In
addition, the other insurance companies and/or retirement plans may have
different policies and procedures or may not have any such policies and
procedures because of contractual limitations. For these reasons, we cannot
guarantee that the Portfolios (and thus contract owners) will not be harmed by
transfer activity relating to other insurance companies and/or retirement
plans that may invest in the Portfolios.
A Portfolio also may assess a short term trading fee (redemption fee) in
connection with a transfer out of the Sub-account investing in that Portfolio
that occurs within a certain number of days following the date of allocation
to the Sub-account. Each Portfolio determines the amount of the short term
trading fee and when the fee is imposed. The fee is retained by or paid to the
Portfolio and is not retained by us. The fee will be deducted from your
Account Value, to the extent allowed by law. At present, no Portfolio has
adopted a short-term trading fee.
DO YOU OFFER DOLLAR COST AVERAGING?
Yes, as discussed below we offer Dollar Cost Averaging during the accumulation
period. In general, Dollar Cost Averaging allows you to systematically
transfer an amount periodically from one investment option to one or more
other investment options. You can
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choose to transfer earnings only, principal plus earnings or a flat dollar
amount. You may elect a Dollar Cost Averaging program that transfers amounts
monthly, quarterly, semi-annually, or annually from Sub-accounts or a program
that transfers amounts monthly from Fixed Allocations or DCA Fixed Rate
Options. By investing amounts on a regular basis instead of investing the
total amount at one time, Dollar Cost Averaging may decrease the effect of
market fluctuation on the investment of your Purchase Payment. This may result
in a lower average cost of units over time. However, there is no guarantee
that Dollar Cost Averaging will result in a profit or protect against a loss
in a declining market. We do not deduct a charge for participating in a Dollar
Cost Averaging Program. You can Dollar Cost Average from Sub-accounts, the
Fixed Allocations or DCA Fixed Rate Options. Dollar Cost Averaging from Fixed
Allocations is subject to a number of rules that include, but are not limited
to the following:
. You may only use Fixed Allocations with Guarantee Periods of 1, 2 or 3
years (except for the DCA Fixed Rate Options).
. You may only Dollar Cost Average earnings or principal plus earnings. If
transferring principal plus earnings, the program must be designed to
last the entire Guarantee Period for the Fixed Allocation.
. Dollar Cost Averaging transfers from Fixed Allocations are not subject
to a Market Value Adjustment.
NOTE: WHEN A DOLLAR COST AVERAGING PROGRAM IS ESTABLISHED FROM A FIXED
ALLOCATION OR A DCA FIXED RATE OPTION, THE FIXED RATE OF INTEREST WE CREDIT TO
YOUR ACCOUNT VALUE IS APPLIED TO A DECLINING BALANCE DUE TO THE TRANSFERS OF
ACCOUNT VALUE TO THE SUB-ACCOUNTS. THIS WILL REDUCE THE EFFECTIVE RATE OF
RETURN ON THE FIXED ALLOCATION OR A DCA FIXED RATE OPTION OVER THE GUARANTEE
PERIOD OR THE DURATION OF THE PROGRAM, RESPECTIVELY.
The Dollar Cost Averaging programs are not available if you have elected an
automatic rebalancing program or an asset allocation program. Dollar Cost
Averaging from Fixed Allocations also is not available if you elect certain
optional benefits.
Prudential Annuities originally offered specific Fixed Allocations with
Guarantee Periods of 6 months or 12 months exclusively for use with a Dollar
Cost Averaging program on the APEX II product. Those 6 month/12 month Fixed
Allocations were designed to automatically transfer Account Value in either 6
or 12 payments under a Dollar Cost Averaging program. Dollar Cost Averaging
transfers commenced on the date the Fixed Allocation was established, and then
proceeded each month following until the entire principal amount plus earnings
was transferred. Fixed Allocations could only be established with your initial
Purchase Payment or additional purchase payments. You could not transfer
existing Account Value to a Fixed Allocation. We discontinued offering these 6
and 12 month Fixed Allocations beginning on May 1, 2009.
Under our current dollar cost averaging program used with Fixed Allocations,
Account Value allocated to the Fixed Allocations will be transferred to the
Sub-accounts you choose. If you terminate the Dollar Cost Averaging program
before the entire principal amount plus earnings has been transferred to the
Sub-account(s), you must transfer all remaining Account Value to any other
investment option. Unless you provide alternate instructions at the time you
terminate the Dollar Cost Averaging program, Account Value will be transferred
to the AST Money Market Sub-account. Transfers from Fixed Allocations as part
of a Dollar Cost Averaging program are not subject to a Market Value
Adjustment. However, a Market Value Adjustment will apply if you terminate the
Dollar Cost Averaging program before the entire principal amount plus earnings
has been transferred to the Sub-account(s). Please note that under the 6 or 12
Month DCA Program (described immediately below), no Market Value Adjustment
applies.
6 OR 12 MONTH DOLLAR COST AVERAGING PROGRAM (THE "6 OR 12 MONTH DCA PROGRAM").
WE NO LONGER OFFER OUR 6 OR 12 MONTH DCA PROGRAM.
The 6 or 12 Month DCA Program was available for contracts issued between
May 1, 2009 and October 31, 2011. The program is subject to our rules at the
time of election and may not be available in conjunction with other programs
and benefits we make available. We may discontinue, modify or amend this
program from time to time. Highest Daily Lifetime 7 Plus, Spousal Highest
Daily Lifetime 7 Plus, Highest Daily Lifetime 6 Plus and Spousal Highest Daily
Lifetime 6 Plus are the only optional living benefits and the Highest
Anniversary Value death benefit and the Combination 5% Roll-up + HAV death
benefit are the only death benefits you may participate in if you also
participate in the 6 or 12 Month DCA Program, although you do not need to
select any optional benefit to participate in the program. To participate in
the 6 or 12 Month DCA Program, you must allocate at least a $2000 Purchase
Payment to our DCA Fixed Rate Options. These DCA Fixed Rate Options are
distinct from the Fixed Allocations described immediately above. Most notably,
transfers out of a DCA Fixed Rate Option are never subject to a Market Value
Adjustment. Dollar cost averaging does not assure a profit, or protect against
a loss.
THE KEY FEATURES OF THIS PROGRAM ARE AS FOLLOWS:
. You may only allocate purchase payments to these DCA Fixed Rate Options.
You may not transfer Account Value into this program.
. As part of your election to participate in the 6 or 12 Month DCA
Program, you specify whether the monthly transfers under the 6 or 12
Month DCA Program are to be made over a 6 month or 12 month period. We
then set the monthly transfer amount, by dividing the Purchase Payment
you have allocated to the DCA Fixed Rate Options by the number of
months. For example, if you allocated $6000, and selected a 6 month DCA
Program, we would transfer $1000 each month. We will adjust the monthly
transfer amount if, during the transfer period, the amount allocated to
the DCA Fixed Rate Options is reduced (e.g., due to the deduction of the
applicable portion of the fee for an optional benefit, withdrawals or
due to a transfer of Account Value out of the DCA Fixed Rate Options
initiated by the mathematical formula used with Highest Daily Lifetime 7
Plus, Spousal Highest Daily Lifetime 7 Plus Highest Daily Lifetime 6
Plus, or Spousal Highest Daily
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Lifetime 6 Plus. In that event, we will re-calculate the amount of each
remaining transfer by dividing the amount in the DCA Fixed Rate Option
by the number of remaining transfers. If the recalculated transfer
amount is below the minimum transfer required by the program, we will
transfer the remaining amount from the DCA Fixed Rate Option on the next
scheduled transfer and terminate the program.
. Any withdrawals, transfers, or fees deducted from the DCA Fixed Rate
Options will reduce the DCA Fixed Rate Options on a "last-in, first-out"
basis. If you have only one 6 or 12 Month DCA Program in operation,
withdrawals, transfers, or fees may be deducted from the DCA Fixed Rate
Options associated with that Program. You may, however, have more than
one 6 or 12 Month DCA Program operating at the same time (so long as any
such additional 6 or 12 Month DCA Program is of the same duration). For
example, you may have more than one 6 month DCA Program running, but may
not have a 6 month Program running simultaneously with a 12 month
Program. If you have multiple 6 or 12 Month DCA Programs running, then
the above reference to "last-in, first-out" means that amounts will be
deducted first from the DCA Fixed Rate Options associated with the 6 or
12 Month DCA Program that was established most recently.
. The first transfer under the Program occurs on the day you allocate a
Purchase Payment to the DCA Fixed Rate Options (unless modified to
comply with State law) and on each month following until the entire
principal amount plus earnings is transferred.
. We do not count transfers under the 6 or 12 Month DCA Program against
the number of free transfers allowed under your Annuity.
. The minimum transfer amount is $100, although we will not impose that
requirement with respect to the final amount to be transferred under the
Program.
. If you are not participating in Highest Daily Lifetime 7 Plus, Spousal
Highest Daily Lifetime 7 Plus Highest Daily Lifetime 6 Plus, or Spousal
Highest Daily Lifetime 6 Plus, we will make transfers under the 6 or 12
Month DCA Program to the Sub-accounts that you specified upon your
election of the Program. If you are participating in any Highest Daily
Lifetime 7 Plus benefit or Highest Daily Lifetime 6 Plus benefit, we
will allocate amounts transferred out of the DCA Fixed Rate Options in
the following manner: (a) if you are participating in the Custom
Portfolios Program (we may have referred to the "Custom Portfolios
Program" as the "Optional Allocation and Rebalancing Program" in other
materials), we will allocate to the Sub-accounts in accordance with the
rules of that program (b) if you are not participating in the Custom
Portfolios Program, we will make transfers under the Program to the
Sub-accounts that you specified upon your election of the Program,
provided those instructions comply with the allocation requirements for
Highest Daily Lifetime 7 Plus, Highest Daily Lifetime 6 Plus, Spousal
Highest Daily Lifetime 7 Plus or Spousal Highest Daily Lifetime 6 Plus
(as applicable) and (c) whether or not you participate in the Custom
Portfolios Program, no portion of our monthly transfer under the 6 or 12
Month DCA Program will be directed initially to the AST Investment Grade
Bond Sub-account (although the DCA Fixed Rate Option is treated as a
"Permitted Sub-account" for purposes of transfers to the AST Investment
Grade Bond Sub-account under the pre-determined mathematical formula
under the Highest Daily Lifetime 7 Plus or Highest Daily Lifetime 6 Plus
benefits) (see below).
. If you are participating in Highest Daily Lifetime 7 Plus, Spousal
Highest Daily Lifetime 7 Plus, Highest Daily Lifetime 6 Plus or Spousal
Highest Daily Lifetime 6 Plus and also are participating in the 6 or 12
Month DCA Program, and the formula under the benefit dictates a transfer
from the Permitted Sub-accounts to the AST Investment Grade Bond
Sub-account, then the amount to be transferred will be taken entirely
from the Sub-accounts, provided there is sufficient Account Value in
those Sub-accounts to meet the required transfer amount. Only if there
is insufficient Account Value in those Sub-accounts will an amount be
withdrawn from the DCA Fixed Rate Options associated with the 6 or 12
Month DCA Program. Amounts withdrawn from the DCA Fixed Rate Options
under the formula will be taken on a last-in, first-out basis.
. If you are participating in one of our automated withdrawal programs
(e.g., Systematic Withdrawals), we may include within that withdrawal
program amounts held within the DCA Fixed Rate Options. If you have
elected any Highest Daily Lifetime 7 Plus or Highest Daily Lifetime 6
Plus benefit, any withdrawals will be taken on a pro-rata basis from
your Sub-accounts and the DCA Fixed Rate Options.
. We impose no fee for your participation in the 6 or 12 Month DCA Program.
. You may cancel the DCA Program at any time. If you do, we will transfer
any remaining amount held within the DCA Fixed Rate Options according to
your instructions. If you do not provide any such instructions, we will
transfer any remaining amount held in the DCA Fixed Rate Options on a
pro rata basis to the Sub-accounts in which you are invested currently.
If any such Sub-account is no longer available, we may allocate the
amount that would have been applied to that Sub-account to the AST Money
Market Sub-account.
. You cannot utilize "rate lock" with the 6 or 12 Month DCA Program. The
interest rate we credit under the program will be the rate on the date
the purchase payment is allocated to the 6 or 12 Month DCA Program.
. We credit interest to amounts held within the DCA Fixed Rate Options at
the applicable declared rates. We credit such interest until the
earliest of the following (a) the date the entire amount in the DCA
Fixed Rate Option has been transferred out (b) the date the entire
amount in the DCA Fixed Rate Option is withdrawn (c) the date as of
which any death benefit payable is determined or (d) the Annuity Date.
. The interest rate earned in a DCA Fixed Rate Option will be no less than
the minimum guaranteed interest rate. We may, from time to time, declare
new interest rates for new purchase payments that are higher than the
minimum guaranteed interest rate. Please note that the interest rate
that we apply under the 6 or 12 Month DCA Program is applied to a
declining balance. Therefore, the amount of interest you receive will
decrease as amounts are systematically transferred from the DCA Fixed
Rate Option to the Sub-accounts, and the effective interest rate earned
will therefore be less than the declared interest rate.
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. The 6 or 12 Month DCA Program may be referred to in your Rider and/or
the Application as the "Enhanced Dollar Cost Averaging Program."
NOTE: WHEN A 6 OR 12 MONTH DCA PROGRAM IS ESTABLISHED FROM A DCA FIXED RATE
OPTION, THE FIXED RATE OF INTEREST WE CREDIT TO YOUR ACCOUNT VALUE IS APPLIED
TO A DECLINING BALANCE DUE TO THE TRANSFERS OF ACCOUNT VALUE TO THE
SUB-ACCOUNTS (INCLUDING ANY TRANSFERS UNDER AN OPTIONAL BENEFIT FORMULA). THIS
WILL REDUCE THE EFFECTIVE RATE OF RETURN ON THE DCA FIXED RATE OPTION.
HOW DO THE FIXED ALLOCATIONS WORK?
We credit a fixed interest rate to the Fixed Allocation throughout a set
period of time called a "Guarantee Period." (Note that the discussion in this
section of Guarantee Periods is not applicable to the Benefit Fixed Rate
Account and the DCA Fixed Rate Options). Fixed Allocations currently are
offered with Guarantee Periods from 1 to 10 years. We may make Fixed
Allocations of different durations available in the future, including Fixed
Allocations offered exclusively for use with certain optional investment
programs. Fixed Allocations may not be available in all states and may not
always be available for all Guarantee Periods depending on market factors and
other considerations.
The interest rate credited to a Fixed Allocation is the rate in effect when
the Guarantee Period begins and does not change during the Guarantee Period.
The rates are an effective annual rate of interest. We determine the interest
rates, in our sole discretion, for the various Guarantee Periods. At the time
that we confirm your Fixed Allocation, we will advise you of the interest rate
in effect and the date your Fixed Allocation matures. We may change the rates
we credit new Fixed Allocations at any time. Any change in interest rate does
not affect Fixed Allocations that were in effect before the date of the
change. To inquire as to the current rates for Fixed Allocations, please call
1-888-PRU-2888.
A Guarantee Period for a Fixed Allocation begins:
. when all or part of a net Purchase Payment is allocated to that
particular Guarantee Period;
. upon transfer of any of your Account Value to a Fixed Allocation for
that particular Guarantee Period; or
. when you "renew" a Fixed Allocation by electing a new Guarantee Period.
To the extent permitted by law, we may establish different interest rates for
Fixed Allocations offered to a class of Owners who choose to participate in
various optional investment programs we make available. This may include, but
is not limited to, Owners who elect to use Fixed Allocations under a dollar
cost averaging program (see "Do You Offer Dollar Cost Averaging?") or the
Balanced Investment Program.
The interest rate credited to Fixed Allocations offered to this class of
purchasers may be different than those offered to other purchasers who choose
the same Guarantee Period but who do not participate in an optional investment
program. Any such program is at our sole discretion.
Prudential Annuities offers Fixed Allocations with Guarantee Periods of 3
months or 6 months exclusively for use as a short-term Fixed Allocation
("Short-term Fixed Allocations"). Short-term Fixed Allocations may only be
established with your initial Purchase Payment or additional purchase
payments. You may not transfer existing Account Value to a Short-term Fixed
Allocation. We reserve the right to terminate offering these special purpose
Fixed Allocations at any time.
On the Maturity Date of the Short-term Fixed Allocation, the Account Value
will be transferred to the Sub-account(s) you choose at the inception of the
program. If no instructions are provided, such Account Value will be
transferred to the AST Money Market Sub-account. Short-term Fixed Allocations
may not be renewed on the Maturity Date. If you surrender the Annuity or
transfer any Account Value from the Short-term Fixed Allocation to any other
investment option before the end of the Guarantee Period, a Market Value
Adjustment will apply.
HOW DO YOU DETERMINE RATES FOR FIXED ALLOCATIONS?
We do not have a specific formula for determining the fixed interest rates for
Fixed Allocations. Generally the interest rates we offer for Fixed Allocations
will reflect the investment returns available on the types of investments we
make to support our fixed rate guarantees. These investment types may include
cash, debt securities guaranteed by the United States government and its
agencies and instrumentalities, money market instruments, corporate debt
obligations of different durations, private placements, asset-backed
obligations and municipal bonds. In determining rates we also consider factors
such as the length of the Guarantee Period for the Fixed Allocation,
regulatory and tax requirements, liquidity of the markets for the type of
investments we make, commissions, administrative and investment expenses, our
insurance risks in relation to the Fixed Allocations, general economic trends
and competition. Some of these considerations are similar to those we consider
in determining the Insurance Charge that we deduct from Account Value
allocated to the Sub-accounts. For some of the same reasons that we deduct the
Insurance Charge against the Account Value allocated to the Sub-accounts, we
also take into consideration mortality, expense, administration, profit and
other factors in determining the interest rates we credit to Fixed
Allocations, and therefore, we credit lower interest rates due to the
existence of these factors than we otherwise would.
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We will credit interest on a new Fixed Allocation in an existing Annuity at a
rate not less than the rate we are then crediting to Fixed Allocations for the
same Guarantee Period selected by new Annuity purchasers in the same class.
The interest rate we credit for a Fixed Allocation may be subject to a
minimum. Please refer to the Statement of Additional Information. In certain
states the interest rate may be subject to a minimum under state law or
regulation.
WHAT HAPPENS WHEN MY GUARANTEE PERIOD MATURES?
The "Maturity Date" for a MVA Fixed Allocation is the last day of the
Guarantee Period (note that the discussion in this section of Guarantee
Periods is not applicable to the Fixed Allocations used with a dollar cost
averaging program, Benefit Fixed Rate Account, and the DCA Fixed Rate
Options). Before the Maturity Date, you may choose to renew the MVA Fixed
Allocation for a new Guarantee Period of the same or different length or you
may transfer all or part of that MVA Fixed Allocation's Account Value to
another MVA Fixed Allocation or to one or more Sub-accounts. We will not
charge a MVA if you choose to renew a MVA Fixed Allocation on its Maturity
Date or transfer the Account Value to one or more Sub-accounts. We will notify
you before the end of the Guarantee Period about the fixed interest rates that
we are currently crediting to all MVA Fixed Allocations that are being
offered. The rates being credited to Fixed Allocations may change before the
Maturity Date.
IF YOU DO NOT SPECIFY HOW YOU WANT A FIXED ALLOCATION TO BE ALLOCATED ON ITS
MATURITY DATE, WE WILL THEN TRANSFER THE ACCOUNT VALUE IN THE FIXED ALLOCATION
TO THE AST MONEY MARKET SUB-ACCOUNT. You can then elect to allocate the
Account Value to any of the Sub-accounts or to a new Fixed Allocation.
DO YOU OFFER ANY AUTOMATIC REBALANCING PROGRAMS?
Yes. During the accumulation period, we offer Automatic Rebalancing among the
Sub-accounts you choose. You can choose to have your Account Value rebalanced
monthly, quarterly, semi-annually, or annually. On the appropriate date, the
Sub-accounts you chose are rebalanced to the allocation percentages you
requested. With Automatic Rebalancing, we transfer the appropriate amount from
the "overweighted" Sub-accounts to the "underweighted" Sub-accounts to return
your allocations to the percentages you request. For example, over time the
performance of the Sub-accounts will differ, causing your percentage
allocations to shift. We also offer the Custom Portfolios Program (we may have
referred to the "Custom Portfolios Program" as the "Optional Allocation and
Rebalancing Program" in other materials), which is available if you have
elected one of the Highest Daily Lifetime Seven, Highest Daily Lifetime 7
Plus, Highest Daily Lifetime 6 Plus, Highest Daily GRO II, or GRO Plus II
benefits.
Any transfer to or from any Sub-account that is not part of your Automatic
Rebalancing program, will be made: however that Sub-account will not become
part of your rebalancing program unless we receive instructions from you
indicating that you would like such option to become part of the program.
There is no minimum Account Value required to enroll in Automatic Rebalancing.
All rebalancing transfers as part of an automatic rebalancing program are not
included when counting the number of transfers each year toward the maximum
number of free transfers. We do not deduct a charge for participating in an
Automatic Rebalancing program. Participation in the Automatic Rebalancing
program may be restricted if you are enrolled in certain other optional
programs. Sub-accounts that are a part of a Systematic Withdrawal program or
Dollar Cost Averaging program will be excluded from an Automatic Rebalancing
program.
If you are participating in an optional living benefit (such as Highest Daily
Lifetime 6 Plus) that makes transfers under a pre-determined mathematical
formula, and you have opted for automatic rebalancing, you should be aware
that: (a) the AST bond portfolio used as part of the pre-determined
mathematical formula will not be included as part of automatic rebalancing and
(b) the operation of the formula may result in the rebalancing not conforming
to the percentage allocations that you specified originally as part of your
Automatic Rebalancing Program.
ARE ANY ASSET ALLOCATION PROGRAMS AVAILABLE?
We currently do not offer any asset allocation programs for use with your
Annuity. Prior to December 5, 2005, we made certain asset allocation programs
available. If you enrolled in one of the asset allocation programs prior to
December 5, 2005, see the Appendix entitled, "Additional Information on the
Asset Allocation Programs" for more information on how the programs are
administered.
WHAT IS THE BALANCED INVESTMENT PROGRAM?
We offer a balanced investment program where a portion of your Account Value
is allocated to a Fixed Allocation and the remaining Account Value is
allocated to the Sub-accounts that you select. When you enroll in the Balanced
Investment Program, you choose the duration that you wish the program to last.
This determines the duration of the Guarantee Period for the Fixed Allocation.
Based on the fixed rate for the Guarantee Period chosen, we calculate the
portion of your Account Value that must be allocated to the Fixed Allocation
to grow to a specific "principal amount" (such as your initial Purchase
Payment). We determine the amount based on the rates then in effect for the
Guarantee Period you choose. If you continue the program until the end of the
Guarantee Period and make no withdrawals or transfers, at the end of the
Guarantee Period, the Fixed Allocation will have grown to equal the "principal
amount". Withdrawals or transfers from the Fixed Allocation before the end of
the Guarantee Period will terminate the program and may be subject to a Market
Value Adjustment (which may be positive or negative). You can transfer the
Account Value that is not allocated to the Fixed Allocation between any of the
Sub-accounts available under the Annuity. Account Value you allocate to the
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Sub-accounts is subject to market fluctuations and may increase or decrease in
value. We do not deduct a charge for participating in the Balanced Investment
Program. This program is not available if your Annuity is held as a
Beneficiary Annuity.
EXAMPLE
Assume you invest $100,000. You choose a 10-year program and allocate a
portion of your Account Value to a Fixed Allocation with a 10-year
Guarantee Period. The rate for the 10-year Guarantee Period is 2.50%*.
Based on the fixed interest rate for the Guarantee Period chosen, the
factor is 0.781198 for determining how much of your Account Value will be
allocated to the Fixed Allocation. That means that $78,120 will be
allocated to the Fixed Allocation and the remaining Account Value
($21,880) will be allocated to the Sub-accounts. Assuming that you do not
make any withdrawals or transfers from the Fixed Allocation, it will grow
to $100,000 at the end of the Guarantee Period. Of course we cannot
predict the value of the remaining Account Value that was allocated to
the Sub-accounts.
* The rate in this example is hypothetical and may not reflect the current
rate for Guarantee Periods of this duration.
MAY I GIVE MY FINANCIAL PROFESSIONAL PERMISSION TO FORWARD TRANSACTION
INSTRUCTIONS?
Yes. Subject to our rules, your Financial Professional may forward
instructions regarding the allocation of your Account Value, and request
financial transactions involving investment options. IF YOUR FINANCIAL
PROFESSIONAL HAS THIS AUTHORITY, WE DEEM THAT ALL TRANSACTIONS THAT ARE
DIRECTED BY YOUR FINANCIAL PROFESSIONAL WITH RESPECT TO YOUR ANNUITY HAVE BEEN
AUTHORIZED BY YOU. You must contact us immediately if and when you revoke such
authority. We will not be responsible for acting on instructions from your
Financial Professional until we receive notification of the revocation of such
person's authority. We may also suspend, cancel or limit these privileges at
any time. We will notify you if we do.
MAY I AUTHORIZE MY THIRD PARTY INVESTMENT ADVISOR TO MANAGE MY ACCOUNT?
Yes. You may engage your own investment advisor to manage your account. These
investment advisors may be firms or persons who also are appointed by us, or
whose affiliated broker-dealers are appointed by us, as authorized sellers of
the Annuity. EVEN IF THIS IS THE CASE, HOWEVER, PLEASE NOTE THAT THE
INVESTMENT ADVISOR YOU ENGAGE TO PROVIDE ADVICE AND/OR MAKE TRANSFERS FOR YOU,
IS NOT ACTING ON OUR BEHALF, BUT RATHER IS ACTING ON YOUR BEHALF. We do not
offer advice about how to allocate your Account Value under any circumstance.
As such, we are not responsible for any recommendations such investment
advisors make, any investment models or asset allocation programs they choose
to follow or any specific transfers they make on your behalf. Please note that
if you have engaged a third-party investment advisor to provide asset
allocation services with respect to your Annuity, we may not allow you to
elect an optional benefit that requires investment in an asset allocation
Portfolio and/or that involves mandatory Account Value transfers (e.g. Highest
Daily GRO).
Any fee that is charged by your investment advisor is in addition to the fees
and expenses that apply under your Annuity. If you authorize your investment
advisor to withdraw amounts from your Annuity to pay for the investment
advisor's fee, as with any other withdrawal from your Annuity, you may incur
adverse tax consequences, and/or a Market Value Adjustment. Withdrawals to pay
your investment advisor (to the extent permitted) generally will also reduce
the level of various living and death benefit guarantees provided (e.g. the
withdrawals will reduce proportionately the Annuity's guaranteed minimum death
benefit.) WE ARE NOT A PARTY TO THE AGREEMENT YOU HAVE WITH YOUR INVESTMENT
ADVISOR AND DO NOT VERIFY THAT AMOUNTS WITHDRAWN FROM YOUR ANNUITY, INCLUDING
AMOUNTS WITHDRAWN TO PAY FOR THE INVESTMENT ADVISOR'S FEE, ARE WITHIN THE
TERMS OF YOUR AGREEMENT WITH YOUR INVESTMENT ADVISOR. You will, however,
receive confirmations of transactions that affect your Annuity. It is your
responsibility to arrange for the payment of the advisory fee charged by your
investment advisor. Similarly, it is your responsibility to understand the
advisory services provided by your investment advisor and the advisory fees
charged for those services.
We or an affiliate of ours may provide administrative support to licensed,
registered Financial Professionals or investment advisors who you authorize to
make financial transactions on your behalf. We may require Financial
Professionals or investment advisors, who are authorized by multiple contract
owners to make financial transactions, to enter into an administrative
agreement with Prudential Annuities as a condition of our accepting
transactions on your behalf. The administrative agreement may impose
limitations on the Financial Professional's or investment advisor's ability to
request financial transactions on your behalf. These limitations are intended
to minimize the detrimental impact of a Financial Professional who is in a
position to transfer large amounts of money for multiple clients in a
particular Portfolio or type of portfolio or to comply with specific
restrictions or limitations imposed by a Portfolio(s) on Prudential Annuities.
PLEASE NOTE: Annuities where your Financial Professional or investment advisor
has the authority to forward instruction on financial transactions are also
subject to the restrictions on transfers between investment options that are
discussed in the section entitled "ARE THERE RESTRICTIONS OR CHARGES ON
TRANSFERS BETWEEN INVESTMENT OPTIONS?." Since transfer activity directed by a
Financial Professional or third party investment adviser may result in
unfavorable consequences to all contract owners invested in the affected
options, we reserve the right to limit the investment options available to a
particular Owner where such authority as described above has been given to a
Financial Professional or investment advisor or impose other transfer
restrictions we deem necessary. The administrative agreement may limit the
available investment options, require advance notice of large transactions, or
impose other trading limitations on your Financial Professional. Your
Financial Professional will be informed of all such restrictions on an ongoing
basis. We may also require that your Financial Professional transmit all
financial transactions using the electronic trading functionality available
through our Internet website (www.prudentialannuities.com).
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Limitations that we may impose on your Financial Professional or investment
advisor under the terms of the administrative agreement do not apply to
financial transactions requested by an owner on their own behalf, except as
otherwise described in this prospectus.
HOW DOES THE MARKET VALUE ADJUSTMENT WORK?
If you transfer or withdraw Account Value from a MVA Fixed Allocation any day
before the end of its Guarantee Period, we will adjust the value of your
investment based on a formula, called a "Market Value Adjustment" or "MVA".
Under certain optional benefits (such as GRO and GRO Plus) a formula transfers
amounts between MVA Fixed Allocations and the Permitted Sub-accounts. The
Market Value Adjustment formula compares the interest rates credited for Fixed
Allocations at the time you invested, to interest rates being credited when
you make a transfer or withdrawal. The amount of any Market Value Adjustment
can be either positive or negative, depending on the rates that are currently
being credited on Fixed Allocations. Any Market Value Adjustment that applies
will be subject to our rules for complying with applicable state law.
MVA FORMULA
The MVA formula is applied separately to each MVA Fixed Allocation to
determine the Account Value of the MVA Fixed Allocation on a particular date.
The formula is as follows:
[(1+I) / (1+J+0.0010)]/(N/12)/
where:
I is the fixed interest rate we guaranteed to credit to the Fixed
Allocation as of its starting date;
J is the fixed interest rate for your class of annuities at the time of
the withdrawal for a new Fixed Allocation with a Guarantee Period equal
to the remaining number of years in your original Guarantee Period;
N is the number of months remaining in the original Guarantee Period.
The denominator of the MVA formula includes a factor, currently equal to
0.0010 or 10 basis points. It is an adjustment that is applied when an MVA is
assessed (regardless of whether the MVA is positive or negative) and, relative
to when no factor is applied, will reduce the amount being surrendered or
transferred from the MVA Fixed Allocation.
If you surrender your Annuity under the right to cancel provision, the MVA
formula is:
[(1 + I)/(1 + J)]/(N/12)/
If the transfer or withdrawal does not occur on the yearly or monthly
anniversary of the beginning of the MVA Fixed Allocation, the numbers used in
'J' and 'N' will be rounded to the next highest integer.
MVA EXAMPLES
The following hypothetical examples show the effect of the MVA in determining
Account Value. Assume the following:
. You allocate $50,000 into a Fixed Allocation with a Guarantee Period of
5 years.
. The interest rate for your Fixed Allocation is 5.0% (I = 5.0%).
. You make no withdrawals or transfers until you decide to withdraw the
entire Fixed Allocation after exactly three (3) years, at which point 24
months remain before the Maturity Date (N = 24).
EXAMPLE OF POSITIVE MVA
Assume that at the time you request the withdrawal, the fixed interest rate
for a new Fixed Allocation with a Guarantee Period of 24 months is 3.5% (J =
3.5%). Based on these assumptions, the MVA would be calculated as follows:
MVA Factor = [(1+I)/(I+J+0.0010)]/(N/12)/ = [1.05/1.036]/(2)/ = 1.027210
Interim Value = $57,881.25
Account Value after MVA = Interim Value X MVA Factor = $59,456.20.
EXAMPLE OF NEGATIVE MVA
Assume that at the time you request the withdrawal, the fixed interest rate
for a new Fixed Allocation with a Guarantee Period of 24 months is 6.0% (J =
6.0%). Based on these assumptions, the MVA would be calculated as follows:
MVA Factor = [(1+I)/(1+J+0.0010)]/(N/12)/ = [1.05/1.061]/(2)/ = 0.979372
Interim Value = $57,881.25
Account Value after MVA = Interim Value X MVA Factor = $56,687.28.
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ACCESS TO ACCOUNT VALUE
WHAT TYPES OF DISTRIBUTIONS ARE AVAILABLE TO ME?
During the accumulation period you can access your Account Value through
partial withdrawals, Systematic Withdrawals, and where required for tax
purposes, Required Minimum Distributions. You can also surrender your Annuity
at any time. There is no Contingent Deferred Sales Charge applied upon
surrender or partial withdrawal. However, if you surrender your Annuity, we
may deduct the Annual Maintenance Fee, any Tax Charge that applies and the
charge for any optional benefits. We may also apply a Market Value Adjustment
to MVA Fixed Allocations being withdrawn or surrendered. Unless you notify us
differently, as permitted withdrawals are taken pro-rata based on the Account
Value in the investment options at the time we receive your withdrawal
request. Each of these types of distributions is described more fully below.
ARE THERE TAX IMPLICATIONS FOR DISTRIBUTIONS FROM NON-QUALIFIED ANNUITIES?
DURING THE ACCUMULATION PERIOD
A distribution during the accumulation period is deemed to come first from any
"gain" in your Annuity and second as a return of your "tax basis", if any.
Distributions from your Annuity are generally subject to ordinary income
taxation on the amount of any investment gain unless the distribution
qualifies as a non-taxable exchange or transfer. If you take a distribution
prior to the taxpayer's age 59 1/2, you may be subject to a 10% penalty in
addition to ordinary income taxes on any gain. You may wish to consult a
professional tax advisor for advice before requesting a distribution.
DURING THE ANNUITIZATION PERIOD
During the annuitization period, a portion of each annuity payment is taxed as
ordinary income at the tax rate you are subject to at the time of the payment.
The Code and regulations have "exclusionary rules" that we use to determine
what portion of each annuity payment should be treated as a return of any tax
basis you have in your Annuity. Once the tax basis in your Annuity has been
distributed, the remaining annuity payments are taxable as ordinary income.
The tax basis in your Annuity may be based on the tax-basis from a prior
contract in the case of a 1035 exchange or other qualifying transfer.
There may also be tax implications on distributions from qualified Annuities.
See "Tax Considerations" for information about qualified Annuities and for
additional information about nonqualified Annuities.
SPECIAL RULES FOR DISTRIBUTIONS TO PAY ADVISORY FEES
We treat partial withdrawals to pay advisory fees as taxable distributions
unless:
. your Annuity is being used in conjunction with a "qualified" retirement
plan (plans meeting the requirements of Sections 401, 403 or 408 of the
Code); and
. in relation to Section 403 or 408 plans, you and your Advisor provide
acceptable proof to us, limiting the source of the Advisor's
compensation to the assets of an applicable qualified retirement plan,
and making certain other representations.
CAN I WITHDRAW A PORTION OF MY ANNUITY?
Yes, you can make a withdrawal during the accumulation period.
We call this a "partial withdrawal." The minimum partial withdrawal you may
request is $100. We may apply a Market Value Adjustment to any MVA Fixed
Allocations. After any partial withdrawal, your Annuity must have a Surrender
Value of at least $1,000, or we may treat the partial withdrawal request as a
request to fully surrender your Annuity.
Partial withdrawals may also be available following annuitization but only if
you choose certain annuity payment options. Note, however, that we do not
permit communication once annuity payments have commenced.
To request the forms necessary to make a withdrawal from your Annuity, call
1-888-PRU-2888 or visit our Internet Website at www.prudentialannuities.com.
CAN I MAKE PERIODIC WITHDRAWALS FROM THE ANNUITY DURING THE ACCUMULATION
PERIOD?
Yes. We call these "Systematic Withdrawals." You can receive Systematic
Withdrawals of earnings only or a flat dollar amount. Systematic Withdrawals
can be made from Account Value allocated to the Sub-accounts or certain Fixed
Allocations. Systematic Withdrawals are available on a monthly, quarterly,
semi-annual or annual basis.
Systematic Withdrawals will be taken pro-rata from the Sub-accounts and the
MVA Fixed Allocations up to growth in the MVA Fixed Allocations and thereafter
pro-rata solely from the Sub-accounts. The growth in the MVA Fixed Allocations
at any point in time consists of the remaining earnings since the program of
systematic withdrawal began. Systematic Withdrawals are available on a
monthly, quarterly, semi-annual or annual basis.
The minimum amount for each Systematic Withdrawal is $100. If any scheduled
Systematic Withdrawal is for less than $100 (which may occur under a program
that provides payment of an amount equal to the earnings in your Annuity for
the period
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requested), we may postpone the withdrawal and add the expected amount to the
amount that is to be withdrawn on the next scheduled Systematic Withdrawal.
We will withdraw systematic withdrawals from the Investment Options you have
designated (your "designated Investment Options"). If you do not designate
Investment Options for systematic withdrawals, we will withdraw systematic
withdrawals pro rata based on the Account Value in the Investment Options at
the time we pay out your withdrawal (i.e. "pro rata" meaning that the
percentage of each Investment Option withdrawn is the same percentage that the
Investment Option bears to the total Account Value). For any scheduled
systematic withdrawal for which you have elected a specific dollar amount and
have specified percentages to be withdrawn from your designated Investment
Options, if the amounts in your designated Investment Options cannot satisfy
such instructions, we will withdraw systematic withdrawals pro rata, as just
described, based on the Account Value across all your Investment Options.
Please note that if you are participating in certain optional living benefits
(e.g., Highest Daily Lifetime 6 Plus), systematic withdrawals must be taken
pro rata. Ownership changes to and assignment of your Annuity will terminate
any systematic withdrawals that had been in effect on the date of the change.
DO YOU OFFER A PROGRAM FOR WITHDRAWALS UNDER SECTION 72(T) OF THE INTERNAL
REVENUE CODE?
Yes. If your Annuity is used as a funding vehicle for certain retirement plans
that receive special tax treatment under Sections 401, 403(b) or 408 of the
Code, Section 72(t) of the Code may provide an exception to the 10% penalty
tax on distributions made prior to age 59 1/2 if you elect to receive
distributions as a series of "substantially equal periodic payments". We may
apply a Market Value Adjustment to any MVA Fixed Allocations. To request a
program that complies with Sections 72(t), you must provide us with certain
required information in writing on a form acceptable to us. We may require
advance notice to allow us to calculate the amount of 72(t) withdrawals. The
Surrender Value of your Annuity must be at least $20,000 before we will allow
you to begin a program for withdrawals under Sections 72(t). The minimum
amount for any such withdrawal is $100 and payments may be made monthly,
quarterly, semi-annually or annually.
You may also annuitize your contract and begin receiving payments for the
remainder of your life (or life expectancy) as a means of receiving income
payments before age 59 1/2 that are not subject to the 10% penalty.
WHAT ARE REQUIRED MINIMUM DISTRIBUTIONS AND WHEN WOULD I NEED TO MAKE THEM?
(See "Tax Considerations" for a further discussion of Required Minimum
Distributions.)
Required Minimum Distributions are a type of Systematic Withdrawal we allow to
meet distribution requirements under Sections 401, 403(b) or 408 of the Code.
Required Minimum Distribution rules do not apply to Roth IRAs during the
Owner's lifetime. Under the Code, you may be required to begin receiving
periodic amounts from your Annuity. In such case, we will allow you to make
Systematic Withdrawals in amounts that satisfy the Required Minimum
Distribution rules under the Code. However, no MVA will be assessed on a
withdrawal taken to meet RMD requirements applicable to your Annuity.
The amount of the Required Minimum Distribution for your particular situation
may depend on other annuities, savings or investments. We will only calculate
the amount of your Required Minimum Distribution based on the value of your
Annuity. We require three (3) days advance written notice to calculate and
process the amount of your payments. You may elect to have Required Minimum
Distributions paid out monthly, quarterly, semi-annually or annually. The $100
minimum amount that applies to Systematic Withdrawals applies to monthly
Required Minimum Distributions but does not apply to Required Minimum
Distributions taken out on a quarterly, semi-annual or annual basis.
You may also annuitize your contract and begin receiving payments for the
remainder of your life (or life expectancy) as a means of receiving income
payments and satisfying the Required Minimum Distribution provisions under the
Code.
Please see "Highest Daily Lifetime 7 Plus" under the subsection "Required
Minimum Distributions" for further information relating to Required Minimum
Distributions if you own that benefit.
CAN I SURRENDER MY ANNUITY FOR ITS VALUE?
Yes. During the accumulation period you can surrender your Annuity at any
time. Upon surrender, you will receive the Surrender Value. We may apply a
Market Value Adjustment to any MVA Fixed Allocations. Upon surrender of your
Annuity, you will no longer have any rights under the surrendered Annuity.
Under certain annuity payment options, you may be allowed to surrender your
Annuity for its then current value.
To request the forms necessary to surrender your Annuity, call 1-888-PRU-2888
or visit our Internet Website at www.prudentialannuities.com.
We apply as a threshold, in certain circumstances, a minimum Surrender Value
of $1,000. If you purchase an Annuity without a lifetime guaranteed minimum
withdrawal benefit, we will not allow you to take any withdrawals that would
cause your Annuity's
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Account Value, after taking the withdrawal, to fall below the minimum
Surrender Value. Likewise, if you purchase an Annuity with certain lifetime
guaranteed minimum withdrawal benefits, we will not allow you to take a
Non-Lifetime Withdrawal (see "Living Benefits") that would cause your
Annuity's Account Value, after taking the withdrawal, to fall below the
minimum Surrender Value.
WHAT TYPES OF ANNUITY OPTIONS ARE AVAILABLE?
We currently make available annuity options that provide fixed annuity
payments. Your Annuity provides certain fixed annuity payment options. We do
not guarantee to continue to make available or any other option other than the
fixed annuity payment options set forth in your contract. Fixed options
provide the same amount with each payment. Adjustable options provide a fixed
payment that is periodically adjusted based on current interest rates. Please
refer to the "Living Benefits" section below for a description of annuity
options that are available when you elect one of the living benefits. For
additional information on annuity payment options you may request a Statement
of Additional Information. You must annuitize your entire Account Value;
partial annuitizations are not allowed.
You may choose an Annuity Date, an annuity option and the frequency of annuity
payments. You may change your choices before the Annuity Date under the terms
of your contract. A maximum Annuity Date may be required by law or under the
terms of your Annuity. The Annuity Date may depend on the annuity option you
choose. Certain annuity options may not be available depending on the age of
the Annuitant. See section below entitled "How and When Do I Choose the
Annuity Payment Option?"
Certain of these annuity options may be available as "settlement options" to
Beneficiaries who choose to receive the Death Benefit proceeds as a series of
payments instead of a lump sum payment.
For Beneficiary Annuities, no annuity payments are available and all
references to an Annuity Date are not applicable.
OPTION 1
PAYMENTS FOR LIFE: Under this option, income is payable periodically until the
death of the "Key Life". The "Key Life" (as used in this section) is the
person or persons upon whose life annuity payments are based. No additional
annuity payments are made after the death of the Key Life. Since no minimum
number of payments is guaranteed, this option offers the largest amount of
periodic payments of the life contingent annuity options. It is possible that
only one payment will be payable if the death of the Key Life occurs before
the date the second payment was due, and no other payments nor death benefits
would be payable. Under this option, you cannot make a partial or full
surrender of the annuity. Under this option, you cannot make a partial or full
surrender of the annuity.
OPTION 2
PAYMENTS BASED ON JOINT LIVES: Under this option, income is payable
periodically during the joint lifetime of two Key Lives, and thereafter during
the remaining lifetime of the survivor, ceasing with the last payment prior to
the survivor's death. No minimum number of payments is guaranteed under this
option. It is possible that only one payment will be payable if the death of
all the Key Lives occurs before the date the second payment was due, and no
other payments or death benefits would be payable. Under this option, you
cannot make a partial or full surrender of the annuity.
OPTION 3
PAYMENTS FOR LIFE WITH A CERTAIN PERIOD: Under this option, income is payable
until the death of the Key Life. However, if the Key Life dies before the end
of the period selected (5, 10 or 15 years), the remaining payments are paid to
the Beneficiary until the end of such period. Under this option, you cannot
make a partial or full surrender of the annuity. If this Annuity is issued as
a Qualified Annuity contract and annuity payments begin after age 92, then
this Option will be modified to permit a period certain that will end no later
than the life expectancy of the annuitant defined under the IRS Required
Minimum Distribution tables.
OPTION 4
FIXED PAYMENTS FOR A CERTAIN PERIOD: Under this option, income is payable
periodically for a specified number of years. If the payee dies before the end
of the specified number of years, the remaining payments are paid to the
Beneficiary until the end of such period. Note that under this option,
payments are not based on any assumptions of life expectancy. Therefore, that
portion of the Insurance Charge assessed to cover the risk that Key Lives
outlive our expectations provides no benefit to an Owner selecting this
option. Under this option, you cannot make a partial or full surrender of the
annuity.
We may make different annuity and settlement options available in the future.
We do not guarantee to continue to make available or any other option other
than the fixed annuity payment options set forth in your contract.
HOW AND WHEN DO I CHOOSE THE ANNUITY PAYMENT OPTION?
You have a right to choose your Annuity Date, provided it is no later than the
maximum Annuity Date that may be required by law or under the terms of your
Annuity.
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For Annuities issued prior to November 20, 2006:
. If you do not provide us with your Annuity Date, a default date for the
Annuity Date will be the first day of the calendar month following the
later of the Annuitant's 85/th/ birthday or the fifth anniversary of our
receipt of your request to purchase an Annuity; and
. Unless you instruct us otherwise, the annuity payments, where allowed by
law, will be calculated on a fixed basis under Option 3, Payments for
Life with 10 years certain.
If you choose to defer the Annuity Date beyond the default date, the IRS may
not consider your Annuity to be an annuity under the tax law. If that should
occur, all gain in your Annuity at that time will become immediately taxable
to you. Further, each subsequent year's increase in Account Value would be
taxable in that year. By choosing to continue to defer after the default date,
you will assume the risk that your Annuity will not be considered an annuity
for federal income tax purposes.
For Annuities issued on or after November 20, 2006:
. Unless we agree otherwise, the Annuity Date you choose must be no later
than the first day of the calendar month coinciding with or next
following the later of the oldest Owner's or Annuitant's 95/th/
birthday, whichever occurs first, and the fifth anniversary of the Issue
Date.
. If you do not provide us with your Annuity Date, the maximum date as
described above will be the default date; and, unless you instruct us
otherwise, we will pay you the annuity payments and the annuity
payments, where allowed by law, will be calculated on a fixed basis
under Option 3, Payments for Life with 10 years certain.
Please note that annuitization essentially involves converting your Account
Value to an annuity payment stream, the length of which depends on the terms
of the applicable annuity option. Thus, once annuity payments begin, your
death benefit is determined solely under the terms of the applicable annuity
payment option, and you no longer participate in any optional living benefit
(unless you have annuitized under that benefit).
HOW ARE ANNUITY PAYMENTS CALCULATED?
FIXED ANNUITY PAYMENTS
If you choose to receive fixed annuity payments, you will receive equal
fixed-dollar payments throughout the period you select. The amount of the
fixed payment will vary depending on the annuity payment option and payment
frequency you select. Generally, the first annuity payment is determined by
multiplying the Account Value, minus any state premium taxes that may apply,
by the factor determined from our table of annuity rates. The table of annuity
rates differs based on the type of annuity chosen and the frequency of payment
selected. Our rates will not be less than our guaranteed minimum rates. These
guaranteed minimum rates are derived from the 1983a Individual Annuity
Mortality Table with an assumed interest rate of 3% per annum. Where required
by law or regulation, such annuity table will have rates that do not differ
according to the gender of the Key Life. Otherwise, the rates will differ
according to the gender of the Key Life.
ADJUSTABLE ANNUITY PAYMENTS
We may make an adjustable annuity payment option available. Adjustable annuity
payments are calculated similarly to fixed annuity payments except that on
every fifth (5/th/) anniversary of receiving annuity payments, the annuity
payment amount is adjusted upward or downward depending on the rate we are
currently crediting to annuity payments. The adjustment in the annuity payment
amount does not affect the duration of remaining annuity payments, only the
amount of each payment.
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LIVING BENEFITS
DO YOU OFFER BENEFITS DESIGNED TO PROVIDE INVESTMENT PROTECTION FOR OWNERS
WHILE THEY ARE ALIVE?
Prudential Annuities offers different optional benefits, for an additional
charge, that can provide investment protection for Owners while they are
alive. No optional benefit may be elected if your Annuity is held as a
Beneficiary Annuity. Notwithstanding the additional protection provided under
the optional Living Benefit, the additional cost has the impact of reducing
net performance of the investment options. Each optional benefit offers a
distinct type of guarantee, regardless of the performance of the Sub-accounts,
that may be appropriate for you depending on the manner in which you intend to
make use of your Annuity while you are alive. Depending on which optional
benefit you choose, you can have flexibility to invest in the Sub-accounts
while:
.. protecting a principal amount from decreases in value as of specified
future dates due to investment performance;
.. taking withdrawals with a guarantee that you will be able to withdraw not
less than a guaranteed benefit base over time;
.. guaranteeing a minimum amount of growth will be applied to your principal,
if it is to be used as the basis for certain types of lifetime income
payments or lifetime withdrawals; or
.. providing spousal continuation of certain benefits.
The "living benefits" are as follows:
Guaranteed Return Option (GRO)/ 1/
Guaranteed Return Option Plus (GRO Plus)/ 1/
Guaranteed Return Option Plus 2008 (GRO Plus 2008)/ 1/
Highest Daily Guaranteed Return Option (Highest Daily GRO)/ 1/
Guaranteed Return Option Plus II (GRO Plus II)
Highest Daily Guaranteed Return Option Plus II (HD GRO II)
Guaranteed Minimum Withdrawal Benefit (GMWB)/ 1/
Guaranteed Minimum Income Benefit (GMIB)/ 1/
Lifetime Five Income Benefit and Spousal Lifetime Five Income Benefit/ 1/
Highest Daily Lifetime Five Income Benefit/ 1/
Highest Daily Lifetime Seven Income Benefit/ 1/
Spousal Highest Daily Lifetime Seven Income Benefit/ 1/
Highest Daily Lifetime Seven with Beneficiary Income Option Income Benefit/ 1/
Highest Daily Lifetime Seven with Lifetime Income Accelerator Income Benefit/
1/
Spousal Highest Daily Lifetime Seven with Beneficiary Income Option Income
Benefit/ 1/
Highest Daily Lifetime 7 Plus Income Benefit/ 1/
Spousal Highest Daily Lifetime 7 Plus Income Benefit/ 1/
Highest Daily Lifetime 7 Plus with Beneficiary Income Option Benefit/ 1/
Highest Daily Lifetime 7 Plus with Lifetime Income Accelerator Benefit/ 1/
Spousal Highest Daily Lifetime 7 Plus with Beneficiary Income Option Benefit/
1/
Highest Daily Lifetime 6 Plus Income Benefit
Highest Daily Lifetime 6 Plus with Lifetime Income Accelerator Benefit
Spousal Highest Daily Lifetime 6 Plus Income Benefit
(1)No longer available for new elections.
Here is a general description of each kind of living benefit that exists under
this Annuity:
.. GUARANTEED MINIMUM ACCUMULATION BENEFITS. The common characteristic of
these benefits is that a specified amount of your annuity value is
guaranteed at some point in the future. For example, under our Highest
Daily GRO II benefit, we make an initial guarantee that your annuity value
on the day you start the benefit will not be any less ten years later. If
your annuity value is less on that date, we use our own funds to give you
the difference. Because the guarantee inherent in the guaranteed minimum
accumulation benefit does not take effect until a specified number of years
into the future, you should elect such a benefit only if your investment
time horizon is of at least that duration. Please note that these
guaranteed minimum accumulation benefits require your participation in
certain predetermined mathematical formulas that may transfer your Account
Value between certain permitted Sub-accounts and a bond portfolio
Sub-account (or MVA Fixed Allocations, for certain of the benefits). The
portfolio restrictions and the use of each formula may reduce the
likelihood that we will be required to make payments to you under the
living benefits.
.. GUARANTEED MINIMUM INCOME BENEFIT OR ("GMIB"). As discussed elsewhere in
this Prospectus, you have the right under your Annuity to ask us to convert
your accumulated annuity value into a series of annuity payments.
Generally, the smaller the amount of your annuity value, the smaller the
amount of your annuity payments. GMIB addresses this risk, by guaranteeing
a certain amount of appreciation in the amount used to produce annuity
payments. Thus, even if your annuity value goes down in value, GMIB
guarantees that the amount we use to determine the amount of the annuity
payments will go up in value by the prescribed amount. You should select
GMIB only if you are prepared to delay your annuity payments for the
required waiting period and if you anticipate needing annuity payments.
This benefit is no longer available for new elections.
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.. GUARANTEED MINIMUM WITHDRAWAL BENEFIT OR ("GMWB"). This benefit is designed
for someone who wants to access the annuity's value through withdrawals
over time, rather than by annuitizing. This benefit guarantees that a
specified amount will be available for withdrawal over time, even if the
value of the annuity itself has declined. Please note that there is a
maximum Annuity Date under your Annuity, by which date annuity payments
must commence. This benefit is no longer available for new elections.
.. LIFETIME GUARANTEED MINIMUM WITHDRAWAL BENEFITS. These benefits also are
designed for someone who wants to access the annuity's value through
withdrawals over time, rather than by annuitizing. These benefits differ,
however, in that the withdrawal amounts are guaranteed for life (or until
the second to die of spouses). The way that we establish the guaranteed
amount that, in turn, determines the amount of the annual lifetime payments
varies among these benefits. Under our Highest Daily Lifetime 6 Plus
benefit, for example, the guaranteed amount generally is equal to your
highest daily Account Value, appreciated at six percent annually. Please
note that there is a maximum Annuity Date under your Annuity, by which date
annuity payments must commence. Certain of these benefits are no longer
available for new elections. Under any of the Guaranteed Lifetime
Withdrawal Benefits (e.g., Highest Daily Lifetime 6 Plus), withdrawals in
excess of the Annual Income Amount, called "Excess Income," will result in
a permanent reduction in future guaranteed withdrawal amounts. If you
purchased your contract in New York and wish to withdraw Excess Income but
are uncertain how it will impact your future guaranteed withdrawal amounts,
you may contact us prior to requesting the withdrawal to obtain a
personalized, transaction-specific calculation showing the effect of taking
the withdrawal.
FINALLY, PLEASE NOTE THAT CERTAIN OF THESE BENEFITS REQUIRE YOUR PARTICIPATION
IN A PREDETERMINED MATHEMATICAL FORMULA THAT MAY TRANSFER YOUR ACCOUNT VALUE
BETWEEN CERTAIN PERMITTED SUB-ACCOUNTS AND A BOND PORTFOLIO SUB-ACCOUNT (OR
THE GENERAL ACCOUNT, FOR ONE OF THE BENEFITS). ALTHOUGH NOT GUARANTEED, THE
OPTIONAL LIVING BENEFIT INVESTMENT REQUIREMENTS AND THE APPLICABLE FORMULA ARE
DESIGNED TO REDUCE THE DIFFERENCE BETWEEN YOUR ACCOUNT VALUE AND OUR LIABILITY
UNDER THE BENEFIT. MINIMIZING SUCH DIFFERENCE GENERALLY BENEFITS US BY
DECREASING THE RISK THAT WE WILL USE OUR OWN ASSETS TO MAKE BENEFIT PAYMENTS
TO YOU. THOUGH THE INVESTMENT REQUIREMENTS AND FORMULAS ARE DESIGNED TO REDUCE
RISK, THEY DO NOT GUARANTEE ANY APPRECIATION OF YOUR ACCOUNT VALUE. IN FACT,
THEY COULD MEAN THAT YOU MISS APPRECIATION OPPORTUNITIES IN OTHER INVESTMENT
OPTIONS. WE ARE NOT PROVIDING YOU WITH INVESTMENT ADVICE THROUGH THE USE OF
ANY OF THE FORMULAS. IN ADDITION, THE FORMULAS DO NOT CONSTITUTE AN INVESTMENT
STRATEGY THAT WE ARE RECOMMENDING TO YOU.
PLEASE REFER TO THE BENEFIT DESCRIPTIONS THAT FOLLOW FOR A COMPLETE
DESCRIPTION OF THE TERMS, CONDITIONS AND LIMITATIONS OF EACH OPTIONAL BENEFIT.
INVESTMENT RESTRICTIONS APPLY IF YOU ELECT CERTAIN OPTIONAL LIVING BENEFITS.
SEE THE CHART IN THE "INVESTMENT OPTIONS" SECTION OF THE PROSPECTUS FOR A LIST
OF INVESTMENT OPTIONS AVAILABLE AND PERMITTED WITH EACH BENEFIT. WE RESERVE
THE RIGHT TO TERMINATE THIS BENEFIT IF YOU ALLOCATE FUNDS INTO NON-PERMITTED
INVESTMENT OPTIONS. You should consult with your Financial Professional to
determine if any of these optional benefits may be appropriate for you based
on your financial needs. There are many factors to consider, but we note that
among them you may want to evaluate the tax implications of these different
approaches to meeting your needs, both between these benefits and in
comparison to other potential solutions to your needs (e.g., comparing the tax
implications of the withdrawal benefit and annuity payments and comparing
annuity benefits with benefits of other products).
TERMINATION OF EXISTING BENEFITS AND ELECTION OF NEW BENEFITS
If you currently own an Annuity with an optional living benefit that is
terminable, you may terminate the benefit rider and elect one of the currently
available benefits, subject to availability of the benefit at that time and
our then current rules. There is currently no waiting period (you may elect a
new benefit beginning on the next Valuation Day) to elect any living benefit
once a living benefit is terminated provided that the benefit being elected is
available for election post-issue. We reserve the right to waive, change
and/or further limit availability and election frequencies in the future.
Check with your financial professional regarding the availability of
re-electing or electing a benefit and any waiting period. The benefit you
re-elect or elect may be more expensive than the benefit you are terminating.
NOTE THAT ONCE YOU TERMINATE AN EXISTING BENEFIT, YOU LOSE THE GUARANTEES THAT
YOU HAD ACCUMULATED UNDER YOUR EXISTING BENEFIT AND WE WILL BASE ANY
GUARANTEES UNDER THE NEW BENEFIT ON YOUR ACCOUNT VALUE AS OF THE DATE THE NEW
BENEFIT BECOMES ACTIVE. You should carefully consider whether terminating your
existing benefit and electing a new benefit is appropriate for you.
Certain spousal rights under the contract, and our administration of such
spousal rights and related tax reporting comport with our understanding of the
Defense of Marriage Act (which defines a "marriage" as a legal union between a
man and a woman and a "spouse" as a person of the opposite sex). Depending on
the state in which your annuity was issued, we may offer certain spousal
benefits to civil union couples, domestic partners or same-sex marriages. You
should be aware, however, that federal tax law does not recognize civil union
couples, domestic partners or marriage spouses of the same sex. Therefore, we
cannot permit a same-sex civil union partner, domestic partner or spouse to
continue the annuity within the meaning of the tax law upon the death of the
first partner under the annuity's "spousal continuance" provision. Please note
there may be federal tax consequences at the death of the first same-sex civil
union partner, domestic partner or spouse. Civil union couples, domestic
partners and spouses of the same sex should consider that limitation before
selecting a spousal benefit under the annuity.
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GUARANTEED RETURN OPTION PLUS (GRO PLUS)
GRO PLUS IS NO LONGER AVAILABLE FOR ELECTION.
GRO Plus is an optional benefit that, after a seven-year period following
commencement of the benefit (we refer to the end of that period and any
applicable subsequent period as the "maturity date") and on each anniversary
of the maturity date thereafter while the benefit remains in effect,
guarantees your Account Value will not be less than your Account Value on the
effective date of your benefit (called the "Protected Principal Value"). The
benefit also offers you the opportunity to elect a second, enhanced guaranteed
amount at a later date if your Account Value has increased, while preserving
the guaranteed amount established on the effective date of your benefit. The
enhanced guaranteed amount (called the "Enhanced Protected Principal Value")
guarantees that, after a separate period following election of the enhanced
guarantee and on each anniversary thereafter while this enhanced guarantee
amount remains in effect, your Account Value will not be less than your
Account Value on the effective date of your election of the enhanced
guarantee. If the maturity date of any guarantee under GRO Plus is not a
Valuation Day, and we are required to contribute an amount to your Account
Value with respect to that maturing guarantee, we would contribute such an
amount on the next Valuation Day.
The benefit monitors your Account Value daily and, if necessary,
systematically transfers amounts between the Sub-accounts you choose and MVA
Fixed Allocations used to support the Protected Principal Value(s). The
benefit may be appropriate if you wish to protect a principal amount against
poor Sub-account performance as of a specific date in the future. There is an
additional charge if you elected the Guaranteed Return Option Plus benefit.
The guarantees provided by the benefit exist only on the applicable maturity
date(s) and on each anniversary of the maturity date(s) thereafter.
KEY FEATURE - PROTECTED PRINCIPAL VALUE/ENHANCED PROTECTED PRINCIPAL VALUE
The Guaranteed Return Option Plus offers a base guarantee as well as the
option of electing an enhanced guarantee at a later date.
. BASE GUARANTEE: Under the base guarantee, Prudential Annuities
guarantees that on the maturity date and on each anniversary of the
maturity date thereafter that the benefit remains in effect, your
Account Value will be no less than the Protected Principal Value. On
the maturity date and on each anniversary after the maturity date
that the benefit remains in effect, if your Account Value is below
the Protected Principal Value, Prudential Annuities will apply
additional amounts to your Annuity from its general account to
increase your Account Value to be equal to the Protected Principal
Value. A subsequent Purchase Payment increases the amount of the
base guarantee by the amount of the Purchase Payment and withdrawals
reduce the base guarantee (as discussed below). Any amounts applied
to your Account Value by Prudential Annuities on the maturity date
or any anniversary of the maturity date will first be applied to any
MVA Fixed Allocations then required to support guarantees due on
subsequent maturity dates. We all allocate the remainder to the
Sub-accounts pro-rata, based on the Account Value in the
Sub-accounts at that time.
. ENHANCED GUARANTEE: On any anniversary following commencement of the
benefit, you can establish an enhanced guaranteed amount based on
your current Account Value. Under the enhanced guarantee, Prudential
Annuities guarantees that at the end of a specified period following
the election of the enhanced guarantee (also referred to as its
"maturity date"), and on each anniversary of the maturity date
thereafter that the enhanced guaranteed amount remains in effect,
your Account Value will be no less than the Enhanced Protected
Principal Value. YOU CAN ELECT AN ENHANCED GUARANTEE MORE THAN ONCE;
HOWEVER, A SUBSEQUENT ELECTION SUPERSEDES THE PRIOR ELECTION OF AN
ENHANCED GUARANTEE. ELECTION OF AN ENHANCED GUARANTEE DOES NOT
IMPACT THE BASE GUARANTEE. IN ADDITION, YOU MAY ELECT AN "AUTO
STEP-UP" FEATURE THAT WILL AUTOMATICALLY CREATE AN ENHANCED
GUARANTEE (OR INCREASE YOUR ENHANCED GUARANTEE, IF PREVIOUSLY
ELECTED) ON EACH ANNIVERSARY OF THE BENEFIT (AND CREATE A NEW
MATURITY PERIOD FOR THE NEW ENHANCED GUARANTEE) IF THE ACCOUNT VALUE
AS OF THAT ANNIVERSARY EXCEEDS THE PROTECTED PRINCIPAL VALUE AND
ENHANCED PROTECTED PRINCIPAL VALUE BY 7% OR MORE. YOU MAY ALSO ELECT
TO TERMINATE AN ENHANCED GUARANTEE. IF YOU ELECT TO TERMINATE AN
ENHANCED GUARANTEE, ANY AMOUNTS HELD IN THE MVA FIXED ALLOCATIONS
FOR THE ENHANCED GUARANTEE WILL BE LIQUIDATED, ON THE VALUATION DAY
THE REQUEST IS PROCESSED, (WHICH MAY RESULT IN A MARKET VALUE
ADJUSTMENT), AND SUCH AMOUNTS WILL BE TRANSFERRED ACCORDING TO THE
RULES DESCRIBED IN "TERMINATION OF THE BENEFIT/ENHANCED GUARANTEE".
TERMINATION OF AN ENHANCED GUARANTEE WILL NOT RESULT IN TERMINATION
OF THE BASE GUARANTEE. If you have elected the enhanced guarantee,
on the guarantee's maturity date and on each anniversary of the
maturity date thereafter that the enhanced guarantee amount remains
in effect, if your Account Value is below the Enhanced Protected
Principal Value, Prudential Annuities will apply additional amounts
to your Annuity from its general account to increase your Account
Value to be equal to the Enhanced Protected Principal Value. A
subsequent Purchase Payment increases the amount of an enhanced
guarantee by the amount of the Purchase Payment and withdrawals
reduce the enhanced guarantee (as discussed below).
Any amounts applied to your Account Value by Prudential Annuities on the
maturity date or any anniversary of the maturity date will first be applied to
any MVA Fixed Allocations then required to support guarantees due on
subsequent maturity dates. We all allocate the remainder to the Sub-accounts
pro-rata, based on the Account Value in the Sub-accounts at that time.
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If our assumptions are correct and the operations relating to the
administration of the benefit work properly, we do not expect that we will
need to add additional amounts to your Annuity. The Protected Principal Value
is referred to as the "Base Guarantee" and the Enhanced Protected Principal
Value is referred to as the "Step-up Guarantee" in the rider we issue for this
benefit.
WITHDRAWALS UNDER YOUR ANNUITY
Withdrawals from your Annuity, while the benefit is in effect, will reduce the
base guarantee under the benefit as well as any enhanced guarantee. Cumulative
annual withdrawals up to 5% of the Protected Principal Value as of the
effective date of the benefit (adjusted for any subsequent Purchase Payments)
will reduce the applicable guaranteed amount by the actual amount of the
withdrawal (referred to as the "dollar-for-dollar limit"). If the amount
withdrawn is greater than the dollar-for-dollar limit, the portion of the
withdrawal equal to the dollar-for-dollar limit will be treated as described
above, and the portion of the withdrawal in excess of the dollar-for-dollar
limit will reduce the base guarantee and the enhanced guarantee
proportionally, according to the formula as described in the rider for this
benefit (see the examples of this calculation below). Withdrawals other than
Systematic Withdrawals will be taken pro-rata from the Sub-accounts and any
Fixed Allocations. Withdrawals will be subject to all other provisions of your
Annuity, including any Contingent Deferred Sales Charge and Market Value
Adjustment (which may be positive or negative) that would apply.
Charges for other optional benefits under your Annuity that are deducted as an
annual charge in arrears will not reduce the applicable guaranteed amount
under the Guaranteed Return Option Plus benefit, however, any partial
withdrawals in payment of charges for the Plus40/(TM)/ Optional Life Insurance
Rider (not currently offered for sale) and any third party investment advisory
service will be treated as withdrawals and will reduce the applicable
guaranteed amount.
The following examples of dollar-for-dollar and proportional reductions assume
that: 1.) the Issue Date and the effective date of the GRO Plus benefit are
October 13, 2004; 2.) an initial Purchase Payment of $250,000; 3.) a base
guarantee amount of $250,000; and 4.) a dollar-for-dollar limit of $12,500 (5%
of $250,000). The values set forth here are purely hypothetical and do not
reflect the charge for GRO Plus or other fees and charges.
EXAMPLE 1. DOLLAR-FOR-DOLLAR REDUCTION
A $10,000 withdrawal is taken on November 29, 2004 (in the first Annuity
Year). No prior withdrawals have been taken. As the amount withdrawn is less
than the Dollar-for-dollar Limit:
.. The base guarantee amount is reduced by the amount withdrawn (i.e., by
$10,000, from $250,000 to $240,000).
.. The remaining dollar-for-dollar limit ("Remaining Limit") for the balance
of the first Annuity Year is also reduced by the amount withdrawn (from
$12,500 to $2,500).
EXAMPLE 2. DOLLAR-FOR-DOLLAR AND PROPORTIONAL REDUCTIONS
A second $10,000 withdrawal is taken on December 18, 2004 (still within the
first Annuity Year). The Account Value immediately before the withdrawal is
$180,000. As the amount withdrawn exceeds the Remaining Limit of $2,500 from
Example 1:
.. the base guarantee amount is first reduced by the Remaining Limit (from
$240,000 to $237,500);
.. The result is then further reduced by the ratio of A to B, where:
-- A is the amount withdrawn less the Remaining Limit ($10,000 - $2,500, or
$7,500).
-- B is the Account Value less the Remaining Limit ($180,000 - $2,500, or
$177,500).
The resulting base guarantee amount is: $237,500 X (1 - $7,500 / $177,500), or
$227,464.79.
.. The Remaining Limit is set to zero (0) for the balance of the first Annuity
Year.
EXAMPLE 3. RESET OF THE DOLLAR-FOR-DOLLAR LIMIT
A $10,000 withdrawal is made on December 19, 2005 (second Annuity Year). The
Remaining Limit has been reset to the dollar-for-dollar limit of $12,500. As
the amount withdrawn is less than the dollar-for-dollar limit:
.. The base guarantee amount is reduced by the amount withdrawn (i.e., reduced
by $10,000, from $227,464.79 to $217,464.79).
.. The Remaining Limit for the balance of the second Annuity Year is also
reduced by the amount withdrawn (from $12,500 to $2,500).
KEY FEATURE - ALLOCATION OF ACCOUNT VALUE
GRO Plus uses a mathematical formula that we operate to help manage your
guarantees through all market cycles. Each Valuation Day, the formula
determines if any portion of your Account Value needs to be transferred into
or out of the MVA Fixed Allocations, through reference to a "reallocation
trigger". The formula does this by (a) first identifying each guarantee that
is outstanding under GRO Plus (b) then discounting the value of each such
guarantee to a present value, based on crediting rates associated with the MVA
Fixed Allocations, then (c) identifying the largest of such present values.
Then, the formula compares the largest present value to both the Account Value
and the value of assets allocated to the Sub-accounts to determine whether a
transfer into or out of the MVA Fixed Allocations is required. As detailed in
the formula, if that largest present value exceeds the Account Value less a
percentage of the Sub-account value, a transfer into the MVA Fixed Allocations
will occur. Conversely, if the
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largest present value is less than the Account Value less a percentage of the
Sub-account value, a transfer out of the MVA Fixed Allocations will occur.
This required formula helps us manage our financial exposure under the
benefit, by moving assets to a more stable option (i.e., the MVA Fixed
Allocations). The formula is set forth in Appendix N.
If your Account Value is greater than or equal to the reallocation trigger,
then:
.. your Account Value in the Sub-accounts will remain allocated according to
your most recent instructions; and
.. if a portion of your Account Value is allocated to an MVA Fixed Allocation
to support the applicable guaranteed amount, all or a portion of those
amounts may be transferred from the MVA Fixed Allocation and re-allocated
to the Sub-accounts according to any asset allocation programs (including
an Automatic Rebalancing program) established on your Annuity or in the
absence of such programs, pro-rata, based on the Account Values in such
Sub-accounts at that time; and
.. if all of your Account Value is allocated to an MVA Fixed Allocation, then
all or a portion of that amount may be transferred from the MVA Fixed
Allocation and re-allocated to the Sub-accounts, according to the following
hierarchy: (i) first according to any asset allocation program that you may
have in effect (ii) if no such program is in effect, then in accordance
with any automatic rebalancing program that you may have in effect and
(iii) if neither such program is in effect, then to the AST Money Market
Sub-account; and
.. a Market Value Adjustment will apply when we reallocate Account Value from
an MVA Fixed Allocation to the Sub-accounts, which may result in a decrease
or increase in your Account Value.
If your Account Value is less than the reallocation trigger, a portion of your
Account Value in the Sub-accounts will be transferred from the Sub-accounts
pro-rata according to your allocations to a new MVA Fixed Allocation(s) to
support the applicable guaranteed amount. The new MVA Fixed Allocation(s) will
have a Guarantee Period equal to the time remaining until the applicable
maturity date(s). The Account Value allocated to the new MVA Fixed
Allocation(s) will be credited with the fixed interest rate(s) then being
credited to a new MVA Fixed Allocation(s) maturing on the applicable maturity
date(s) (rounded to the next highest yearly duration). The Account Value will
remain invested in each applicable MVA Fixed Allocation until the applicable
maturity date unless, at an earlier date, your Account Value is greater than
or equal to the reallocation trigger and, therefore, amounts can be
transferred to the Sub-accounts while maintaining the guaranteed protection
under the benefit (as described above).
At any given time, some, none, or all of your Account Value may be allocated
to the MVA Fixed Allocations. With respect to any amounts held within the MVA
Fixed Allocations, we can give no assurance how long the amounts will reside
there or if such amounts will transfer out of the MVA Fixed Allocations. If
you make additional Purchase Payments to your Annuity, they will be allocated
to the Sub-accounts according to your allocation instructions. Such additional
Purchase Payments may or may not cause the formula to transfer money in or out
of the MVA Fixed Allocations. Once the Purchase Payments are allocated to your
Annuity, they will also be subject to the formula, which may result in
immediate transfers to or from the MVA Fixed Allocations, if dictated by the
formula. The amount of such transfers will vary, as dictated by the formula,
and will depend on the factors listed below.
Each market cycle is unique, therefore the performance of your Sub-accounts,
and its impact on your Account Value, will differ from market cycle to market
cycle producing different transfer activity under the formula. The amount and
timing of transfers to and from the MVA Fixed Allocations pursuant to the
formula depend on various factors unique to your Annuity and are not
necessarily directly correlated with the securities markets, bond markets,
interest rates or any other market or index. Some of the factors that
determine the amount and timing of transfers (as applicable to your Annuity),
include:
.. The difference between your Account Value (including any Market Value
Adjustment) and your Protected Principal Value(s);
.. The amount of time until the maturity of your guarantee(s);
.. The amount invested in, and the performance of, the Sub-accounts;
.. The amount invested in, and interest earned within, the MVA Fixed
Allocations;
.. The current crediting rates associated with MVA Fixed Allocations;
.. Additional Purchase Payments, if any, that you make to the Annuity; and
.. Withdrawals, if any, taken from the Annuity.
Any amounts invested in the MVA Fixed Allocations will affect your ability to
participate in a subsequent recovery within the Sub-accounts. Conversely, the
Account Value may be higher at the beginning of the recovery, e.g. more of the
Account Value may have been protected from decline and volatility than it
otherwise would have been had the benefit not been elected.
While you are not notified when your Account Value reaches a reallocation
trigger, you will receive a confirmation statement indicating the transfer of
a portion of your Account Value either to or from the MVA Fixed Allocations.
You may not allocate purchase payments to or transfer Account Value to or from
the MVA Fixed Allocations.
Separate Fixed Allocations may be established in support of the Protected
Principal Value and the Enhanced Protected Principal Value (if elected). There
may also be circumstances when an MVA Fixed Allocation will be established
only in support of the Protected Principal Value or the Enhanced Protected
Principal Value. If you elect an enhanced guarantee, it is more likely that a
72
portion of your Account Value may be allocated to MVA Fixed Allocations and
will remain allocated for a longer period of time to support the Enhanced
Protected Principal Value, even during a period of positive Sub-account
performance and/or under circumstances where MVA Fixed Allocations would not
be necessary to support the Protected Principal Value. Further, there may be
circumstances where MVA Fixed Allocations in support of the Protected
Principal Value or Enhanced Protected Principal Value are transferred to the
Sub-accounts under the formula differently than each other because of the
different guarantees they support.
You should be aware of the following potential ramifications of the formula:
.. Transfers of your Account Value can be frequent, and under some scenarios
may occur on a daily basis. As indicated, each such transfer may be subject
to a Market Value Adjustment, which can be positive or negative. Thus, a
Market Value Adjustment will directly increase or reduce your Account Value.
.. As indicated, some or even all, of your Account Value may be maintained in
the MVA Fixed Allocations. The greater the Account Value held in MVA Fixed
Allocations, the larger (in dollar terms) the Market Value Adjustment upon
any transfer of such Account Value to the Sub-accounts.
.. Transfers under the formula do not impact your guarantees under GRO Plus
that have already been locked-in.
ELECTION OF THE BENEFIT
We no longer permit new elections of GRO Plus. If you currently participate in
GRO Plus, your existing guarantees are unaffected by the fact that we no
longer offer GRO Plus. PLEASE NOTE THAT IF YOU TERMINATE A LIVING BENEFIT SUCH
AS GRO PLUS AND ELECT A NEW LIVING BENEFIT, YOU LOSE THE GUARANTEES THAT YOU
HAD ACCUMULATED UNDER YOUR EXISTING BENEFIT AND WE WILL BASE ANY GUARANTEES
UNDER THE NEW BENEFIT ON YOUR ACCOUNT VALUE AS OF THE DATE THE NEW BENEFIT
BECOMES ACTIVE. WE RESERVE THE RIGHT TO WAIVE, CHANGE AND/OR FURTHER LIMIT THE
ELECTION FREQUENCY IN THE FUTURE.
TERMINATION OF THE BENEFIT/ENHANCED GUARANTEE
You can elect to terminate the enhanced guarantee but maintain the protection
provided by the base guarantee. You also can terminate the Guaranteed Return
Option Plus benefit entirely, in which case you will lose any existing
guarantees.
Upon termination of the benefit or the enhanced guarantee, any amounts held in
the MVA Fixed Allocations related to the guarantee(s) being terminated, will
be transferred as follows: (a) if only a portion of your Account Value is in
the MVA Fixed Allocations, we will transfer such Account Value (i) to the
Sub-accounts pro-rata, based on your Account Value in such Sub-accounts on the
day of the transfer, unless we receive other prior instructions from you or
(ii) if you are then participating in an asset allocation program for which we
are providing administrative support, we allocate the transferred amount in
accordance with the then current percentages for that asset allocation program
(b) if your entire Account Value is in the MVA Fixed Allocations, we will
transfer your Account Value to the Sub-account corresponding to the AST Money
Market Portfolio, unless we receive prior instructions from you. A Market
Value Adjustment will apply (except that if the benefit has terminated
automatically due to payment of a death benefit, whether an MVA applies
depends solely on the terms of the death benefit - see the Death Benefit
section of this prospectus).
In general, you may cancel GRO Plus and then elect another living benefit that
is available post issue, effective on any Valuation Day after your
cancellation of GRO Plus. If you terminate GRO Plus, you will lose all
guarantees under that benefit. Your election of another living benefit is
subject to State and firm availability and our eligibility rules.
The benefit will terminate automatically upon: (a) the death of the Owner or
the Annuitant (in an entity owned contract); (b) as of the date Account Value
is applied to begin annuity payments; or (c) upon full surrender of the
Annuity. If you elect to terminate the benefit, the Guaranteed Return Option
Plus will no longer provide any guarantees. The surviving spouse may elect the
benefit at any time, subject to the limitations described above, after the
death of the Annuity Owner. The surviving spouse's election will be effective
on the Valuation Day that we receive the required documentation in good order
at our home office, and the Account Value on that Valuation Day will be the
Protected Principal Value.
SPECIAL CONSIDERATIONS UNDER THE GUARANTEED RETURN OPTION PLUS
This benefit is subject to certain rules and restrictions, including, but not
limited to the following:
.. Upon inception of the benefit, 100% of your Account Value must have been
allocated to the Sub-accounts. No Fixed Allocations may be in effect as of
the date that you elect to participate in the benefit. However, the formula
may transfer Account Value to MVA Fixed Allocations as of the effective
date of the benefit under some circumstances.
.. You cannot allocate any portion of Purchase Payments or transfer Account
Value to or from a MVA Fixed Allocation while participating in the benefit;
however, all or a portion of any Purchase Payments may be allocated by us
to an MVA Fixed Allocations to support the amount guaranteed. You cannot
participate in any dollar cost averaging benefit that transfers Account
Value from a Fixed Allocation to a Sub-account.
.. Transfers from MVA Fixed Allocations made as a result of the formula under
the benefit will be subject to the Market Value Adjustment formula under an
Annuity; however, the 0.10% liquidity factor in the formula will not apply.
A Market Value Adjustment may be either positive or negative. Transfer
amounts will be taken from the most recently established MVA Fixed
Allocation.
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.. Transfers from the Sub-accounts to MVA Fixed Allocations or from MVA Fixed
Allocations to the Sub-accounts under the benefit will not count toward the
maximum number of free transfers allowable under an Annuity.
.. Any amounts applied to your Account Value by Prudential Annuities on the
maturity date or any anniversary of the maturity date will not be treated
as "investment in the contract" for income tax purposes.
.. Low interest rates may require allocation to MVA Fixed Allocations even
when the current Account Value exceeds the guarantee.
.. As the time remaining until the applicable maturity date gradually
decreases the benefit will become increasingly sensitive to moves to MVA
Fixed Allocations.
.. We currently limit the Sub-accounts in which you may allocate Account Value
if you participate in this benefit. Should we prohibit access to any
investment option, any transfers required to move Account Value to eligible
investment options will not be counted in determining the number of free
transfers during an Annuity Year.
CHARGES UNDER THE BENEFIT
We currently deduct a charge equal to 0.25% of the average daily net assets of
the Sub-accounts for participation in the Guaranteed Return Option Plus
benefit. The annual charge is deducted daily. The charge is deducted to
compensate Prudential Annuities for: (a) the risk that your Account Value on
the maturity date is less than the amount guaranteed; and (b) administration
of the benefit. You will begin paying this charge as of the effective date of
the benefit. We will not refund the charges you have paid even if we never
have to make any payments under the benefit.
If you elect the Enhanced Guarantee under the benefit, and on the date you
elect to step-up, the charges under the benefit have changed for new
purchases, your benefit may be subject to the new charge level. These charges
will not exceed the maximum charges shown in the section of this prospectus
entitled "Your Optional Benefit Fees and Charges"
GUARANTEED RETURN OPTION (GRO)(R)
GRO IS NO LONGER AVAILABLE FOR ELECTION.
GRO is an optional benefit that, after a seven-year period following
commencement of the benefit (we refer to the end of that period as the
"maturity date") guarantees your Account Value will not be less than your
Account Value on the effective date of your benefit (called the "Protected
Principal Value").
The benefit monitors your Account Value daily and, if necessary,
systematically transfers amounts pursuant to a mathematical formula between
the Sub-accounts you choose and the MVA Fixed Allocation used to support the
Protected Principal Value. There is an additional charge if you elect the
Guaranteed Return Option benefit.
The guarantee provided by the benefit exists only on the applicable maturity
date. However, due to the ongoing monitoring of your Account Value and the
transfer of Account Value between the Sub-accounts and the MVA Fixed
Allocation to support our future guarantee, the benefit may provide some
protection from significant Sub-account losses if you choose to surrender your
Annuity or begin receiving annuity payments prior to a maturity date.
KEY FEATURE - PROTECTED PRINCIPAL VALUE
Under the GRO benefit, Prudential Annuities guarantees that on the maturity
date, your Account Value will be no less than the Protected Principal Value.
On the maturity date if your Account Value is below the Protected Principal
Value, Prudential Annuities will apply additional amounts to your Annuity from
its general account to increase your Account Value to be equal to the
Protected Principal Value. A subsequent Purchase Payment increases the amount
of the Protected Principal Value by the amount of the Purchase Payment, and
withdrawals reduce the Protected Principal Value (as discussed below).
We will notify you of any amounts added to your Annuity under the benefit. If
our assumptions are correct and the operations relating to the administration
of the benefit work properly, we do not expect that we will need to add
additional amounts to an Annuity. The Protected Principal Value is generally
referred to as the "Guaranteed Amount" in the rider we issue for this benefit.
KEY FEATURE - ALLOCATION OF ACCOUNT VALUE
GRO uses a mathematical formula that we operate to help manage your guarantees
through all market cycles. The formula weighs a number of factors, including
the current Account Value, the value in the Sub-accounts, the value in the MVA
Fixed Allocations, the Protected Principal Value, the expected value of the
MVA Fixed Allocations used to support the guarantee, the time remaining until
maturity, and the current crediting rates associated with the MVA Fixed
Allocations. In essence, and as detailed in the formula, the formula will
transfer Account Value into the MVA Fixed Allocations if needed to support an
anticipated guarantee. The formula is set forth in Appendix O. This required
formula thus helps us manage our financial exposure under the benefit, by
moving assets to a more stable option (i.e., the MVA Fixed Allocations).
Each Valuation Day, the formula determines if any portion of your Account
Value needs to be transferred into or out of the MVA Fixed Allocations,
through reference to a "reallocation trigger". At any given time, some, none,
or all of your Account Value may
74
be allocated to the MVA Fixed Allocations. If your entire Account Value is
transferred to the MVA Fixed Allocations, the formula will not transfer
amounts out of the MVA Fixed Allocations to the Sub-accounts and the entire
Account Value would remain in the MVA Fixed Allocations. If you make
additional Purchase Payments to your Annuity, they will be allocated to the
Sub-accounts according to your allocation instructions. Such additional
Purchase Payments may or may not cause the formula to transfer money in or out
of the MVA Fixed Allocations. Once the Purchase Payments are allocated to your
Annuity, they will also be subject to the formula, which may result in
immediate transfers to or from the MVA Fixed Allocations, if dictated by the
formula. The amount of any such transfers will vary, as dictated by the
formula, and will depend on the factors listed below.
Each market cycle is unique, therefore the performance of your Sub-accounts,
and its impact on your Account Value, will differ from market cycle to market
cycle producing different transfer activity under the formula. The amount and
timing of transfers to and from the MVA Fixed Allocations pursuant to the
formula depend on various factors unique to your Annuity and are not
necessarily directly correlated with the securities markets, bond markets,
interest rates or any other market or index. Some of the factors that
determine the amount and timing of transfers (as applicable to your Annuity),
include:
.. The difference between your Account Value (including any Market Value
Adjustment) and your Protected Principal Value(s);
.. The amount of time until the maturity of your Guarantee(s);
.. The amount invested in, and the performance of, the Sub-accounts;
.. The amount invested in, and interest earned within, the MVA Fixed
Allocations;
.. The current crediting rates associated with MVA Fixed Allocations;
.. Additional Purchase Payments, if any, that you make to the Annuity; and
.. Withdrawals, if any, taken from the Annuity.
Any amounts invested in the MVA Fixed Allocations will affect your ability to
participate in a subsequent recovery within the Sub-accounts. Conversely, the
Account Value may be higher at the beginning of the recovery, e.g. more of the
Account Value may have been protected from decline and volatility than it
otherwise would have been had the benefit not been elected.
While you are not notified when your Account Value reaches a reallocation
trigger, you will receive a confirmation statement indicating the transfer of
a portion of your Account Value either to or from the MVA Fixed Allocation.
You may not allocate purchase payments to or transfer Account Value to or from
the MVA Fixed Allocations.
You should be aware of the following potential ramifications of the formula:
.. A Market Value Adjustment will apply when we reallocate Account Value from
the MVA Fixed Allocations to the Sub-accounts. Transfers of your Account
Value can be frequent, and under some scenarios may occur on a daily basis.
As indicated, each such transfer may be subject to a Market Value
Adjustment, which can be positive or negative. Thus, a Market Value
Adjustment will directly increase or reduce your Account Value.
.. As indicated, some or even all, of your Account Value may be maintained in
the MVA Fixed Allocations. The greater the Account Value held in MVA Fixed
Allocations, the larger (in dollar terms) the Market Value Adjustment upon
any transfer of such Account Value to the Sub-accounts.
.. If your Account Value is less than the reallocation trigger, a portion of
your Account Value in the Sub-accounts will be transferred from your
Sub-accounts pro-rata according to your allocations to a new MVA Fixed
Allocation to support the guaranteed amount. The new MVA Fixed Allocation
will have a Guarantee Period equal to the time remaining until the
applicable maturity date. The Account Value allocated to the new MVA Fixed
Allocation will be credited with the fixed interest rate then being
credited to a new MVA Fixed Allocation maturing on the applicable maturity
date (rounded to the next highest yearly duration). The Account Value will
remain invested in the MVA Fixed Allocation until the maturity date unless,
at an earlier date, your Account Value is greater than or equal to the
reallocation trigger and, therefore, amounts can be transferred to the
Sub-accounts while maintaining the guaranteed protection under the benefit
(as described above).
.. If your Account Value is greater than or equal to the reallocation trigger,
and Account Value must be transferred from the MVA Fixed Allocations to the
Sub-accounts, then those amounts will be transferred from the MVA Fixed
Allocations and re-allocated to the Sub-accounts according to any asset
allocation programs (including an Automatic Rebalancing program)
established on your Annuity or in the absence of such programs, pro-rata,
based on the Account Values in such Sub-accounts at that time. A market
value adjustment will apply upon a transfer out of the MVA Fixed
Allocations, which may result in an increase or decrease in your Account
Value.
.. Transfers under the formula do not impact your guarantees under GRO that
have already been locked-in.
Withdrawals from your Annuity, while the benefit is in effect, will reduce the
Protected Principal Value proportionally. The proportion will be equal to the
proportionate reduction in the Account Value due to the withdrawal as of that
date. Withdrawals will be taken pro rata from the Sub-accounts and any MVA
Fixed Allocations. Systematic Withdrawals will be taken pro-rata from the
Sub-accounts and the MVA Fixed Allocations up to growth in the MVA Fixed
Allocations and thereafter pro-rata solely from the Sub-accounts. The growth
in the MVA Fixed Allocations at any point in time consists of the remaining
earnings since the program of systematic withdrawal began. Withdrawals will be
subject to all other provisions of your Annuity, including any Contingent
Deferred Sales Charge and Market Value Adjustment that would apply.
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ELECTION OF THE BENEFIT
We no longer permit new elections of GRO. If you currently participate in GRO,
your existing guarantees are unaffected by the fact that we no longer offer
GRO. PLEASE NOTE THAT IF YOU TERMINATE A LIVING BENEFIT SUCH AS GRO AND ELECT
A NEW LIVING BENEFIT, YOU LOSE THE GUARANTEES THAT YOU HAD ACCUMULATED UNDER
YOUR EXISTING BENEFIT AND WE WILL BASE ANY GUARANTEES UNDER THE NEW BENEFIT ON
YOUR ACCOUNT VALUE AS OF THE DATE THE NEW BENEFIT BECOMES ACTIVE. WE RESERVE
THE RIGHT TO WAIVE, CHANGE AND/OR FURTHER LIMIT THE ELECTION FREQUENCY IN THE
FUTURE.
RESTART OF THE BENEFIT
Once each Annuity Year you may request to restart the Benefit. Such a request
is an election by you to terminate the existing Benefit (and all guarantees
under the benefit) and start a new one. Restarts only take effect on
anniversaries of the Issue Date. To make such a request for a restart, you
must notify us in advance in accordance with our administrative requirements.
If we accept your request, we then terminate the existing Benefit as of that
valuation period, if it is an anniversary of the Issue Date, or, if not, as of
the next following anniversary of the Issue Date. The new Benefit starts at
that time. The initial Protected Principal Value for the new Benefit is the
Account Value as of the effective date of the new Benefit. Unless you tell us
otherwise, the duration of the new Benefit will be the same as that for the
existing Benefit. However, if we do not then make that duration available, you
must elect from those we make available at that time. For those who elect to
re-start the benefit, the charge will be assessed according to the current
methodology prior to re-starting the benefit - see "Charges under the Benefit"
below.
As part of terminating the existing Benefit, we transfer any amounts in MVA
Fixed Allocations, subject to a Market Value Adjustment, to the Sub-accounts
on a pro-rata basis. If your entire Account Value was then in MVA Fixed
Allocations, you must first provide us instructions as to how to allocate the
transferred Account Value among the Sub-accounts.
TERMINATION OF THE BENEFIT
The Annuity Owner also can terminate the Guaranteed Return Option benefit.
Upon termination, any amounts held in the MVA Fixed Allocations will be
transferred as follows: (a) if only a portion of your Account Value is in the
MVA Fixed Allocations, we will transfer such Account Value (i) to the
Sub-accounts pro-rata based on the Account Values in such Sub-accounts on the
day of the transfer, unless we receive at our office other prior instructions
from you or (ii) if you are then participating in an asset allocation program
for which we are providing administrative support, we allocate the transferred
amount in accordance with the then current percentages for that asset
allocation program (b) if your entire Account Value is in MVA Fixed
Allocations, we will transfer your Account Value to the Sub-account
corresponding to the AST Money Market Portfolio, unless we receive at our
Office prior instructions from you. A Market Value Adjustment will apply
(except that if the benefit has terminated automatically due to payment of a
death benefit, whether an MVA applies depends solely on the terms of the death
benefit - see the Death Benefit section of this prospectus).
In general, you may cancel GRO and then elect another living benefit available
post issue, effective on any Valuation Day after your cancellation of GRO. If
you terminate GRO, you will lose all guarantees under that benefit. Your
election of another living benefit is subject to State and firm availability
and our eligibility rules.
The benefit will terminate automatically upon: (a) the death of the Owner or
the Annuitant (in an entity owned contract); (b) as of the date Account Value
is applied to begin annuity payments; or (c) upon full surrender of your
Annuity. If you elect to terminate the benefit, the Guaranteed Return Option
will no longer provide any guarantees. If the surviving spouse assumes your
Annuity, he/she may re-elect the benefit on any anniversary of the Issue Date
of the Annuity or, if the deceased Owner had not previously elected the
benefit, may elect the benefit at any time. The surviving spouse's election
will be effective on the Valuation Day that we receive the required
documentation in good order at our home office, and the Account Value on that
Valuation Day will be the Protected Principal Value.
The charge for the Guaranteed Return Option benefit will no longer be deducted
from your Account Value after the benefit has been terminated, although for
those Annuities for which the GRO charge is deducted annually rather than
daily (see Charges Under the Benefit below), we will deduct the final annual
charge upon termination of the benefit.
SPECIAL CONSIDERATIONS UNDER THE GUARANTEED RETURN OPTION. This benefit is
subject to certain rules and restrictions, including, but not limited to the
following:
.. Upon inception of the benefit, 100% of your Account Value must have been
allocated to the Sub-accounts. The MVA Fixed Allocation must not have been
in effect as of the date that you elected to participate in the benefit.
However, the formula may transfer Account Value to the MVA Fixed Allocation
as of the effective date of the benefit under some circumstances.
.. Annuity Owners cannot allocate any portion of Purchase Payments or transfer
Account Value to or from the MVA Fixed Allocation while participating in
the benefit; however, all or a portion of any Purchase Payments may be
allocated by us to the MVA Fixed Allocation to support the amount
guaranteed. You cannot participate in any dollar cost averaging benefit
that transfers Account Value from a MVA Fixed Allocation to a Sub-account.
.. Transfers from the MVA Fixed Allocation made as a result of the formula
under the benefit will be subject to the Market Value Adjustment formula
under an Annuity; however, the 0.10% liquidity factor in the formula will
not apply. A Market Value Adjustment may be either positive or negative.
Transfer amounts will be taken from the most recently established MVA Fixed
Allocation.
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.. Transfers from the Sub-accounts to the MVA Fixed Allocation or from the MVA
Fixed Allocation to the Sub-accounts under the benefit will not count
toward the maximum number of free transfers allowable under an Annuity.
.. Any amounts applied to your Account Value by Prudential Annuities on the
maturity date will not be treated as "investment in the contract" for
income tax purposes.
.. Any amounts that we add to your Annuity to support our guarantee under the
benefit will be applied to the Sub-accounts pro rata, after first
transferring any amounts held in the MVA Fixed Allocations as follows:
(a) if only a portion of your Account Value is in the MVA Fixed
Allocations, we will transfer such Account Value (i) to the Sub-accounts
pro-rata based on the Account Values in such Sub-accounts on the day of the
transfer, unless we receive at our office other prior instructions from you
or (ii) if you are then participating in an asset allocation program for
which we are providing administrative support, we allocate the transferred
amount in accordance with the then current percentages for that asset
allocation program and (b) if your entire Account Value is in the MVA Fixed
Allocations, we will transfer your Account Value to the Sub-account
corresponding to the AST Money Market Portfolio, unless we receive at our
Office prior instructions from you.
.. Low interest rates may require allocation to the MVA Fixed Allocation even
when the current Account Value exceeds the guarantee.
.. As the time remaining until the applicable maturity date gradually
decreases the benefit will become increasingly sensitive to moves to the
MVA Fixed Allocation.
.. We currently limit the Sub-accounts in which you may allocate Account Value
if you participate in this benefit. Should we prohibit access to any
investment option, any transfers required to move Account Value to eligible
investment options will not be counted in determining the number of free
transfers during an Annuity Year.
CHARGES UNDER THE BENEFIT
We deduct a charge equal to 0.25% of the average daily net assets of the
Sub-accounts for participation in the Guaranteed Return Option benefit. The
annual charge is deducted daily. The charge is deducted to compensate
Prudential Annuities for: (a) the risk that your Account Value on the maturity
date is less than the amount guaranteed; and (b) administration of the benefit.
Effective November 18, 2002, Prudential Annuities changed the manner in which
the annual charge for the Guaranteed Return Option is deducted to the method
described above. The annual charge for the Guaranteed Return Option for Owners
who elected the benefit between January 23, 2002 and November 15, 2002 and
subsequent to November 19, 2002 in those states where the daily deduction of
the charge has not been approved, is deducted annually, in arrears, according
to the prospectus in effect as of the date the program was elected.
GUARANTEED RETURN OPTION PLUS 2008/SM/ (GRO PLUS 2008)
GRO Plus 2008 is no longer available for new elections.
Under GRO Plus 2008, we guarantee that the Account Value on the date that the
benefit is added to your Annuity (adjusted for subsequent Purchase Payments
and withdrawals as detailed below) will not be any less than that original
value on the seventh anniversary of benefit election and each anniversary
thereafter. We refer to this initial guarantee as the "base guarantee." In
addition to the base guarantee, GRO Plus 2008 offers the possibility of an
enhanced guarantee. You may lock in an enhanced guarantee once per "benefit
year" (i.e., a year beginning on the date you acquired the benefit and each
anniversary thereafter) if your Account Value on the Valuation Day exceeds the
amount of any outstanding base guarantee or enhanced guarantee. We guarantee
that the Account Value locked-in by that enhanced guarantee will not be any
less seven years later, and each anniversary of that date thereafter. In
addition, you may elect an automatic enhanced guarantee feature under which,
if Account Value on a benefit anniversary exceeds the highest existing
guarantee by 7% or more, we guarantee that such Account Value will not be any
less seven benefit anniversaries later and each benefit anniversary
thereafter. You may maintain only one enhanced guarantee in addition to your
base guarantee. Thus, when a new enhanced guarantee is created, it cancels any
existing enhanced guarantee. However, the fact that an enhanced guarantee was
effected automatically on a benefit anniversary does not prevent you from
"manually" locking-in an enhanced guarantee during the ensuing benefit year.
Please note that upon creation of a new enhanced guarantee, an immediate
transfer to an AST bond portfolio Sub-account (which is used as part of this
benefit) may occur depending on the discount rate (as described below) used to
determine the present value of each of your guarantees. You may elect to
terminate an enhanced guarantee without also terminating the base guarantee.
If you do, any amounts held in the AST bond portfolio Sub-account with respect
to that enhanced guarantee will be transferred to your other Sub-accounts in
accordance with your current allocation instructions. Amounts held in an AST
bond portfolio Sub-account with respect to the base guarantee will not be
transferred as a result of the termination of an enhanced guarantee. Please
note that whenever an enhanced guarantee is created, we reserve the right to
increase your charge for GRO Plus 2008 if we have increased the charge for new
elections of the benefit generally. You may not lock in an enhanced guarantee,
either manually or through our optional automatic program, within seven years
of the date by which annuity payments must commence under the terms of your
Annuity (please see "How and When Do I Choose The Annuity Payment Option?" for
further information on your maximum Annuity Date). The inability to lock in an
enhanced guarantee referenced in the immediately preceding sentence also
applies to a new Owner who has acquired the Annuity from the original Owner.
In general, we refer to a date on which the Account Value is guaranteed to be
present as the "maturity date". If the Account Value on the maturity date is
less than the guaranteed amount, we will contribute funds from our general
account to bring your Account
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Value up to the guaranteed amount. If the maturity date is not a Valuation
Day, then we would contribute such an amount on the next Valuation Day. We
will allocate any such amount to each Sub-account (other than the "Current AST
bond portfolio Sub-account" described below) in accordance with your current
allocations instructions. Regardless of whether we need to contribute funds at
the end of a guarantee period, we will at that time transfer all amounts held
within the Current AST bond portfolio Sub-account associated with the maturing
guarantee to your other Sub-accounts, on a pro rata basis. If the entire
Account Value is invested in an AST bond portfolio Sub-account, we will
allocate according to your current allocation instructions.
We increase both the base guarantee and any enhanced guarantee by the amount
of each Purchase Payment made subsequent to the date that the guarantee was
established. For example, if the effective date of the benefit was January 1,
2009 and the Account Value was $100,000 on that date, then a $30,000 Purchase
Payment made on March 30, 2010 would increase the base guarantee amount to
$130,000. As illustrated in the examples below, additional Purchase Payments
also increase an amount we refer to as the "dollar-for-dollar corridor."
The dollar-for-dollar corridor is equal to 5% of the base guarantee amount
(i.e., 5% of the Account Value at benefit election). Thereafter, the
dollar-for-dollar corridor is adjusted only for subsequent Purchase Payments
(i.e., 5% of the Purchase Payment is added to the corridor amount) and "excess
withdrawals" (as described below). Thus, the creation of any enhanced
guarantee has no impact on the dollar-for-dollar corridor. Each "benefit
year", withdrawals that you make that are equal to or less than the
dollar-for-dollar corridor reduce both the amount of the dollar-for-dollar
corridor for that benefit year plus the base guarantee amount and the amount
of any enhanced guarantee by the exact amount of the withdrawal. However, if
you withdraw more than the dollar-for-dollar corridor in a given benefit year,
we use the portion of the withdrawal that exceeded the dollar-for-dollar
corridor to effect a proportional reduction to both the dollar-for-dollar
corridor itself and each guarantee amount. We calculate a proportional
reduction by (i) identifying the amount of the withdrawal that exceeded the
dollar-for-dollar corridor (the "excess withdrawal") (ii) subtracting the
dollar-for-dollar amount from the Account Value prior to the withdrawal (iii)
dividing the excess withdrawal by the amount in (ii). We then use the
resulting proportion to reduce each of the guaranteed amount and the dollar
for dollar corridor itself. See examples of this calculation below.
Any partial withdrawals in payment of any third party investment advisory
service will be treated as withdrawals, and will reduce each guarantee amount
and the dollar-for-dollar corridor in the manner indicated above.
EXAMPLES
The following examples of dollar-for-dollar and proportional reductions assume
that: 1.) the Issue Date and the effective date of the GRO Plus 2008 benefit
are October 13, 2008; 2.) an initial Purchase Payment of $250,000; 3.) a base
guarantee amount of $250,000; and 4.) a dollar-for-dollar limit of $12,500 (5%
of $250,000). The values set forth here are purely hypothetical and do not
reflect the charge for GRO Plus 2008 or other fees and charges.
EXAMPLE 1. DOLLAR-FOR-DOLLAR REDUCTION
A $10,000 withdrawal is taken on November 29, 2008 (in the first Annuity
Year). No prior withdrawals have been taken. As the amount withdrawn is less
than the Dollar-for-dollar Limit:
.. The base guarantee amount is reduced by the amount withdrawn (i.e., by
$10,000, from $250,000 to $240,000).
.. The remaining dollar-for-dollar limit ("Remaining Limit") for the balance
of the first Annuity Year is also reduced by the amount withdrawn (from
$12,500 to $2,500).
EXAMPLE 2. DOLLAR-FOR-DOLLAR AND PROPORTIONAL REDUCTIONS
A second $10,000 withdrawal is taken on December 18, 2008 (still within the
first Annuity Year). The Account Value immediately before the withdrawal is
$180,000. As the amount withdrawn exceeds the Remaining Limit of $2,500 from
Example 1:
.. the base guarantee amount is first reduced by the Remaining Limit (from
$240,000 to $237,500);
.. The result is then further reduced by the ratio of A to B, where:
-- A is the amount withdrawn less the Remaining Limit ($10,000 - $2,500, or
$7,500).
-- B is the Account Value less the Remaining Limit ($180,000 - $2,500, or
$177,500).
The resulting base guarantee amount is: $237,500 X (1 - $7,500 / $177,500), or
$227,464.79.
.. The Remaining Limit is set to zero (0) for the balance of the first Annuity
Year. The resulting dollar-for-dollar corridor for the next Annuity Year is
calculated by multiplying the prior dollar-for-dollar corridor by the same
ratio by which we reduce the Guarantee Amount above: $12,500 X (1 - $7,500
/ $177,500), or $11,971.83.
KEY FEATURE - ALLOCATION OF ACCOUNT VALUE
GRO Plus 2008 uses a mathematical formula to help manage your guarantees
through all market cycles. Because the formula is made part of your schedule
supplement, the formula applicable to you may not be altered once you elect
the benefit. However, subject to regulatory approval, we do reserve the right
to amend the formula for newly-issued Annuities that elect GRO Plus 2008
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and for existing Annuities that elect the benefit in the future. This required
formula helps us manage our financial exposure under GRO Plus 2008, by moving
assets out of certain Sub-accounts if dictated by the formula (see below). In
essence, we seek to preserve the value of these assets, by transferring them
to a more stable option (i.e., one or more specified bond portfolios of
Advanced Series Trust). We refer to these bond portfolios collectively as the
"AST bond portfolios." The formula also contemplates the transfer of assets
from an AST bond portfolio to the other Sub-accounts in certain other
scenarios. The formula described in this section, and which is set forth in
Appendix J to this prospectus, applies to both (a) GRO Plus 2008 and
(b) elections of HD GRO (including HD GRO with the 90% cap feature), where
such an election was made PRIOR to July 16, 2010. The formula applicable to
elections of HD GRO (including HD GRO with the 90% cap feature), where such an
election was made AFTER July 16, 2010, is set forth in Appendix R to this
prospectus. The cap can be referred to as the "the 90% cap" OR "the 90% cap
rule" OR "the 90% cap feature". A summary description of each AST Bond
Portfolio appears within the prospectus section entitled "What Are The
Investment Objectives and Policies Of The Portfolios?". You can find a copy of
the AST Bond Portfolio prospectus by going to www.prudentialannuities.com.
Each AST bond portfolio is unique, in that its underlying investments
generally mature at different times. For example, there would be an AST bond
portfolio whose underlying investments generally mature in 2015, an AST bond
portfolio whose underlying investments generally mature in 2016, and so forth.
We will introduce new AST bond portfolios in subsequent years, to correspond
generally to the length of new guarantee periods that are created under this
benefit (and the Highest Daily GRO benefit). If you have elected GRO Plus
2008, you may invest in an AST bond portfolio only by operation of the
formula, and thus you may not allocate Purchase Payments to such a Portfolio.
Please see this prospectus and the prospectus for the Advanced Series Trust
for more information about each AST bond portfolio used with this benefit.
Although we employ several AST bond portfolios for purposes of the benefit,
the formula described in the next paragraph operates so that your Account
Value may be allocated to only one AST bond portfolio Sub-account at one time.
In the description of the formula in the next paragraph, we refer to the AST
bond portfolio Sub-account in which you are invested immediately prior to any
potential asset transfer as the "Current AST bond portfolio Sub-account." The
formula may dictate that a transfer out of the Current AST Bond Portfolio
Sub-account be made, or alternatively may mandate a transfer into another AST
bond portfolio Sub-account. Any transfer into an AST bond portfolio
Sub-account will be directed to the AST bond portfolio Sub-account associated
with the "current liability" (we refer to that Sub-account as the "Transfer
AST bond portfolio Sub-account"). Note that if the Current AST bond portfolio
Sub-account is associated with the current liability, then that Sub-account
would be the Transfer AST bond portfolio Sub-account, and we would simply
transfer additional assets into the Sub-account if such a transfer is dictated
by the formula. As indicated, the AST bond portfolios are employed with this
benefit to help us mitigate the financial risks under our guarantee. Thus, in
accordance with the formula applicable to you under the benefit, we determine
which AST bond portfolio your Account Value is transferred to, and under what
circumstances a transfer is made. Please note that upon creation of a new
enhanced guarantee, an immediate transfer to the Transfer AST Bond Portfolio
Sub-account may occur, depending on the discount rate (as described in the
next paragraph) used to determine the present value of each of your guarantees.
In general, the formula works as follows (please see Appendix J). On each
Valuation Day, the formula automatically performs an analysis with respect to
each guarantee amount that is outstanding. For each outstanding guarantee, the
formula begins by determining the present value on that Valuation Day that, if
appreciated at the applicable "discount rate", would equal the applicable
guarantee amount on the maturity date. As detailed in the formula, the
discount rate is an interest rate determined by taking a benchmark index used
within the financial services industry and then reducing the rate determined
by that index by a prescribed adjustment. Once selected, we do not change the
applicable benchmark index (although we do reserve the right to use a new
benchmark index if the original benchmark is discontinued). The greatest of
each such present value is referred to as the "current liability" in the
formula. The formula compares the current liability to the amount of your
Account Value held within the Current AST bond portfolio Sub-account and to
your Account Value held within the other Sub-accounts. If the current
liability, reduced by the amount held within the Current AST bond portfolio
Sub-account, and divided by the amount held within your other Sub-accounts,
exceeds an upper target value (currently, 0.85), then the formula will make a
transfer into the Transfer AST bond portfolio Sub-account, in the amount
dictated by the formula. If the current liability, reduced by the amount held
within the Current AST bond portfolio Sub-account, and divided by the amount
within your other Sub-accounts, is less than a lower target value (currently,
0.79), then the formula will transfer Account Value within the Current AST
bond portfolio Sub-account into the other Sub-accounts (other than the
Transfer AST bond portfolio Sub-account), in the amount dictated by the
formula.
As discussed above, each Valuation Day, the formula analyzes the difference
between your Account Value and your guarantees, as well as how long you have
owned the benefit, and determines if any portion of your Account Value needs
to be transferred into or out of the AST bond portfolio Sub-accounts (the
"Bond Portfolios"). Therefore, at any given time, some, none, or all of your
Account Value may be allocated to the Bond Portfolios. If your entire Account
Value is transferred to the Bond Portfolios, then based on the way the formula
operates, the formula will not transfer amounts out of the Bond Portfolios to
the Sub-accounts and the entire Account Value would remain in the Bond
Portfolios. If you make additional Purchase Payments to your Annuity, they
will be allocated to the Sub-accounts according to your allocation
instructions. Such additional Purchase Payments may or may not cause the
formula to transfer money in or out of the Bond Portfolios. Once the Purchase
Payments are allocated to your Annuity, they will also be subject to the
formula, which may result in immediate transfers to or from the Bond
Portfolios, if dictated by the formula. The amounts of any of such transfers
will vary, as dictated by the formula, and will depend on the factors listed
below.
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Each market cycle is unique, therefore the performance of your Sub-accounts,
and its impact on your Account Value, will differ from market cycle to market
cycle producing different transfer activity under the formula. The amount and
timing of transfers to and from the Bond Portfolios pursuant to the formula
depend on various factors unique to your Annuity and are not necessarily
directly correlated with the securities markets, bond markets, interest rates
or any other market or index. Some of the factors that determine the amount
and timing of transfers (as applicable to your Annuity), include:
.. The difference between your Account Value and your Guarantee Amount(s);
.. The amount of time until the maturity of your Guarantee(s);
.. The amount invested in, and the performance of, the Permitted Sub-accounts;
.. The amount invested in, and the performance of, the Bond Portfolios;
.. The discount rate used to determine the present value of your Guarantee(s);
.. Additional Purchase Payments, if any, that you make to the Annuity; and
.. Withdrawals, if any, taken from the Annuity.
Any amounts invested in the Bond Portfolios will affect your ability to
participate in a subsequent recovery within the Permitted Sub-accounts.
Conversely, the Account Value may be higher at the beginning of the recovery,
e.g. more of the Account Value may have been protected from decline and
volatility than it otherwise would have been had the benefit not been elected.
The Bond Portfolios are available only with these benefits, and you may not
allocate Purchase Payments and transfer Account Value to or from the Bond
Portfolios.
Transfers under the formula do not impact any guarantees under the benefit
that have already been locked-in.
ELECTION/CANCELLATION OF THE BENEFIT
GRO Plus 2008 is no longer available for new elections. If you currently
participate in GRO Plus 2008, your existing guarantees are unaffected by the
fact that we no longer offer GRO Plus 2008.
You may cancel the GRO Plus 2008 benefit at any time. You also can cancel an
enhanced guarantee but leave the base guarantee intact. Upon cancellation of
GRO Plus 2008, if only a portion of your Account Value is allocated to an AST
Bond Portfolio Sub-account, we will transfer any Account Value that is held in
such AST Bond Portfolio Sub-account to the other Sub-accounts pro rata based
on the Account Values in such Sub-accounts at that time, unless you are
participating in any asset allocation program or automatic rebalancing program
for which we are providing administrative support or unless we receive at our
Service Office other instructions from you at the time you elect to cancel
this benefit. If your entire Account Value is allocated to an AST Bond
Portfolio Sub-account, we will transfer your Account Value as follows: (a) if
you are participating in an asset allocation program for which we are
providing administrative support, we allocate the transferred amount in
accordance with the then current allocation percentages for that asset
allocation program, (b) if you are not participating in an asset allocation
program, but are participating in an automatic rebalancing program, we
allocate the transferred amount in accordance with that program, or (c) if
neither of the foregoing apply, we will transfer your Account Value to the AST
Money Market Sub-account unless we receive at our Service Office other
instructions from you at the time you elect to terminate this benefit. GRO
Plus 2008 will terminate automatically upon: (a) the death of the Owner or the
Annuitant (in an entity owned contract), unless the Annuity is continued by
the surviving spouse; (b) as of the date Account Value is applied to begin
annuity payments; (c) as of the anniversary of benefit election that
immediately precedes the contractually-mandated latest annuity date, or
(d) upon full surrender of the Annuity. If you elect to terminate the benefit,
GRO Plus 2008 will no longer provide any guarantees. The charge for the GRO
Plus 2008 benefit will no longer be deducted from your Account Value upon
termination of the benefit.
If you wish, you may cancel the GRO Plus 2008 benefit. You may then elect any
other currently available living benefit on any Valuation Day after you have
cancelled the GRO Plus 2008 benefit, provided the request is received in good
order (subject to state availability and in accordance with any applicable age
requirements). Upon your election of another living benefit, Account Value may
be transferred between the AST Bond Portfolio Sub-accounts or, depending on
the benefits selected, the AST Investment Grade Bond Portfolio and the
Permitted Sub-accounts according to the formula. It is possible that over time
the formula could transfer some, most, or none of the Account Value to the AST
Bond Portfolio Sub-accounts or, depending on the benefit selected, the AST
Investment Grade Bond Portfolio under the newly-elected benefit. YOU ALSO
SHOULD BE AWARE THAT UPON CANCELLATION OF THE GRO PLUS 2008 BENEFIT, YOU WILL
LOSE ALL GUARANTEES THAT YOU HAD ACCUMULATED UNDER THE BENEFIT. THUS, THE
GUARANTEES UNDER ANY NEWLY-ELECTED BENEFIT WILL BE BASED ON YOUR CURRENT
ACCOUNT VALUE. THE BENEFIT YOU ELECT OR RE-ELECT MAY BE MORE EXPENSIVE THAN
THE BENEFIT YOU CANCEL. ONCE THE GRO PLUS 2008 BENEFIT IS CANCELED YOU ARE NOT
REQUIRED TO RE-ELECT ANOTHER OPTIONAL LIVING BENEFIT AND ANY SUBSEQUENT
BENEFIT ELECTION MAY BE MADE ON OR AFTER THE FIRST VALUATION DAY FOLLOWING THE
CANCELLATION OF THE GRO PLUS 2008 BENEFIT PROVIDED THAT THE BENEFIT YOU ARE
LOOKING TO ELECT IS AVAILABLE ON A POST-ISSUE BASIS.
SPECIAL CONSIDERATIONS UNDER GRO PLUS 2008
This benefit is subject to certain rules and restrictions, including, but not
limited to the following:
.. Upon inception of the benefit, 100% of your Account Value must have been
allocated to the permitted Sub-accounts. The permitted Sub-accounts are
those described in the Investment Option section of the prospectus. No
fixed interest rate allocations may be in effect as of the date that you
elect to participate in the benefit.
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.. You cannot participate in any dollar cost averaging benefit that transfers
Account Value from a fixed interest rate option to a Sub-account.
.. Transfers between an AST bond portfolio Sub-account and your other
Sub-accounts under the benefit will not count toward the maximum number of
free transfers allowable under the Annuity.
.. Any amounts applied to your Account Value by us on a maturity date will not
be treated as "investment in the contract" for income tax purposes.
.. As the time remaining until the applicable maturity date gradually
decreases, the benefit may become increasingly sensitive to moves to an AST
bond portfolio Sub-account.
.. We currently limit the Sub-accounts in which you may allocate Account Value
if you participate in this benefit. Moreover, if you are invested in
prohibited investment options and seek to acquire the benefit, we will ask
you to reallocate to permitted investment options as a prerequisite to
acquiring the benefit. Should we prohibit access to any investment option,
any transfers required to move Account Value to eligible investment options
will not be counted in determining the number of free transfers during an
Annuity Year.
CHARGES UNDER THE BENEFIT
We deduct a charge equal to 0.60% (0.35%, for elections prior to May 1, 2009)
of the average daily net assets of the Sub-accounts for participation in the
GRO Plus 2008 benefit. The annual charge is deducted daily. The charge is
deducted to compensate us for: (a) the risk that your Account Value on a
maturity date is less than the amount guaranteed and (b) administration of the
benefit. We reserve the right to increase this fee for newly-issued contracts
or new elections of the benefit. The charges will not exceed the maximum
charges shown in the section of the prospectus entitled " Summary of Contract
Fees and Charges." You will begin paying this charge as of the effective date
of the benefit. We will not refund the charges you have paid even if we never
have to make any payments under the benefit.
OPTIONAL 90% CAP FEATURE UNDER GRO PLUS 2008
If you currently own an Annuity and have elected the GRO Plus 2008 benefit,
you can elect this optional feature, at no additional cost, which utilizes a
new mathematical formula. The predetermined mathematical formula is described
below and will replace the "Transfer Calculation" portion of the mathematical
formula currently used in connection with your benefit on a prospective basis.
This election may only be made once and may not be revoked once elected. The
new mathematical formula appears in Appendix J in this prospectus, and is
described below. Only the election of the 90% cap feature will prevent all of
your Account Value from being allocated to an AST bond portfolio Sub-account.
If all of your Account Value is currently allocated to an AST bond portfolio
Sub-account, it will not transfer back to the Permitted Sub-accounts unless
you elect this 90% cap feature. If you make additional Purchase Payments, they
may result in a transfer of Account Value.
Although we employ several AST bond portfolio Sub-accounts for purposes of the
benefit, the formula described in the next paragraph operates so that your
Account Value may be allocated to only one AST bond portfolio Sub-account at
one time. In the description of the formula in the next paragraph, we refer to
the AST bond portfolio Sub-account in which you are invested immediately prior
to any potential asset transfer as the "Current AST bond portfolio
Sub-account." The formula may dictate that a transfer out of the Current AST
bond portfolio Sub-account be made, or alternatively may mandate a transfer
into an AST bond portfolio Sub-account. Any transfer into an AST bond
portfolio Sub-account will be directed to the AST bond portfolio Sub-account
associated with the "current liability" (we refer to that Sub-account as the
"Transfer AST bond portfolio Sub-account"). Note that if the Current AST bond
portfolio Sub-account is associated with the current liability, then that
Sub-account would be the Transfer AST bond portfolio Sub-account, and we would
simply transfer additional assets into the Sub-account if dictated by the
formula.
Under the new formula, the formula will not execute a transfer to the Transfer
AST bond portfolio Sub-account that results in more than 90% of your Account
Value being allocated to the Transfer AST bond portfolio Sub-account ("90% cap
feature"). Thus, on any Valuation Day, if the formula would require a transfer
to the Transfer AST bond portfolio Sub-account that would result in more than
90% of the Account Value being allocated to the Transfer AST bond portfolio
Sub-account, only the amount that results in exactly 90% of the Account Value
being allocated to the Transfer AST bond portfolio Sub-account will be
transferred. Additionally, future transfers into the Transfer AST bond
portfolio Sub-account will not be made (regardless of the performance of the
Transfer AST bond portfolio Sub-account and the Permitted Sub-accounts) at
least until there is first a formula-initiated transfer out of the Transfer
AST bond portfolio Sub-account. Once this transfer occurs out of the Transfer
AST bond portfolio Sub-account, future amounts may be transferred to or from
the Transfer AST bond portfolio Sub-account if dictated by the formula
(subject to the 90% cap feature). At no time will the formula make a transfer
to the Transfer AST bond portfolio Sub-account that results in greater than
90% of your Account Value being allocated to the Transfer AST bond portfolio
Sub-account. However, it is possible that, due to the investment performance
of your allocations in the Transfer AST bond portfolio Sub-account and your
allocations in the Permitted Sub-accounts you have selected, your Account
Value could be more than 90% invested in the Transfer AST bond portfolio
Sub-account.
If you make additional purchase payments to your Annuity while the transfer
restriction of the 90% cap feature is in effect, the formula will not transfer
any of such additional purchase payments to the Transfer AST bond portfolio
Sub-account at least until there is first a transfer out of the Transfer AST
bond portfolio Sub-account, regardless of how much of your Account Value is in
the Permitted Sub-accounts. This means that there could be scenarios under
which, because of the additional purchase payments
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you make, less than 90% of your entire Account Value is allocated to the
Transfer AST bond portfolio Sub-account, and the formula will still not
transfer any of your Account Value to the Transfer AST bond portfolio
Sub-account (at least until there is first a transfer out of the Transfer AST
bond portfolio Sub-account).
For example,
.. March 19, 2010 - a transfer is made that results in the 90% cap feature
being met and now $90,000 is allocated to the Transfer AST bond portfolio
Sub-account and $10,000 is allocated to the Permitted Sub-accounts.
.. March 20, 2010 - you make an additional purchase payment of $10,000. No
transfers have been made from the Transfer AST bond portfolio Sub-account
to the Permitted Sub-accounts since the cap went into effect on March 19,
2010.
.. As of March 20, 2010 (and at least until first a transfer is made out of
the Transfer AST bond portfolio Sub-account under the formula) the $10,000
payment is allocated to the Permitted Sub-accounts and now you have 82% in
the Transfer AST bond portfolio Sub-account and 18% in the Permitted
Sub-accounts (such that $20,000 is allocated to the Permitted Sub-accounts
and $90,000 is allocated to the Transfer AST bond portfolio Sub-account).
.. Once there is a transfer out of the Transfer AST bond portfolio Sub-account
(of any amount), the formula will operate as described above, meaning that
the formula could transfer amounts to or from the Transfer AST bond
portfolio Sub-account if dictated by the formula (subject to the 90% cap
feature).
If at the time you elect the 90% cap feature, more than 90% of your Account
Value is allocated to an AST bond portfolio Sub-account used with the benefit,
a transfer will be made from the AST bond portfolio Sub-account such that
Account Value will be allocated 90% to the AST bond portfolio Sub-account and
10% will be allocated to your elected Sub-accounts. Amounts to be transferred
from the AST bond portfolio Sub-account to your elected Sub-accounts will be
transferred according to the following "hierarchy" (i.e., if a given item is
inapplicable, we use the next instruction that is applicable): (a) the
percentages dictated by any existing asset allocation program; or (b) the
percentages dictated by any auto-rebalancing program; or (c) pro-rata
according to amounts currently held in your elected Sub-accounts; or
(d) according to the currently-effective allocation instructions used for the
allocation of subsequent Purchase Payments. It is possible that additional
transfers might occur after this initial transfer if dictated by the formula.
The amount of such additional transfer(s) will vary. If, on the date this
feature is elected, 100% of your Account Value is allocated to the Transfer
AST bond portfolio Sub-account, a transfer of an amount equal to 10% of your
Account Value will be made to your Permitted Sub-accounts.
It is possible that an additional transfer to the Permitted Sub-accounts could
occur the following Valuation Day(s), and in some instances (based upon the
formula) the additional transfer(s) could be large. Thereafter, your Account
Value can be transferred between the Transfer AST bond portfolio Sub-account
and your Permitted Sub-accounts as frequently as daily, based on what the
formula prescribes.
Once the transfer restriction of the 90% cap feature is triggered, future
transfers into the Transfer AST bond portfolio Sub-account will not be made
(regardless of the performance of the Transfer AST bond portfolio Sub-account
and the Permitted Sub-accounts) at least until there is first a transfer out
of the Transfer AST bond portfolio Sub-account. Once this transfer occurs out
of the Transfer AST bond portfolio Sub-account, future amounts may be
transferred to or from the Transfer AST bond portfolio Sub-account if dictated
by the formula (subject to the 90% cap feature).
IMPORTANT CONSIDERATIONS WHEN ELECTING THIS FEATURE:
.. At any given time, some, most or none of your Account Value may be
allocated to the Transfer AST bond portfolio Sub-account.
.. Please be aware that because of the way the 90% cap feature mathematical
formula operates, it is possible that more than or less than 90% of your
Account Value may be allocated to the Transfer AST bond portfolio
Sub-account.
.. If this feature is elected, any Account Value transferred to the Permitted
Sub-accounts is subject to the investment performance of those
Sub-accounts. Your Account Value can go up or down depending on the
performance of the Permitted Sub-accounts you select.
.. Your election of the 90% cap feature will not result in your losing the
guarantees you had accumulated under your existing GRO Plus 2008 benefit.
GUARANTEED RETURN OPTION PLUS II (GRO PLUS II)
You can elect this benefit on the Issue Date of your Annuity, or at any time
thereafter if available. In addition, you may cancel GRO Plus II and then
re-elect the benefit beginning on the next Valuation Day if available,
provided that your Account Value is allocated as required by the benefit and
you otherwise meet our eligibility rules. If you cancel the benefit, you lose
all guarantees that you had accumulated under the benefit. The initial
guarantee under the newly-elected benefit will be based on your current
Account Value at the time the new benefit becomes effective on your Annuity.
GRO Plus II is not available if you participate in any other optional living
benefit. However, GRO Plus II may be elected together with any optional death
benefit, other than the Highest Daily Value Death Benefit and the Plus40
Optional Life Insurance Rider. As detailed below under "Key Feature -
Allocation of Account Value", your participation in this benefit among other
things entails your participation in a program that, as dictated by a
predetermined mathematical formula, may transfer your Account Value between
your elected Sub-accounts and an AST bond portfolio Sub-account.
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Under GRO Plus II, we guarantee that the Account Value on the date that the
benefit is added to your Annuity (adjusted for subsequent purchase payments
and withdrawals as detailed below) will not be any less than that original
value on the seventh anniversary of benefit election and each anniversary
thereafter. We refer to this initial guarantee as the "base guarantee." In
addition to the base guarantee, GRO Plus II offers the possibility of an
enhanced guarantee. You may "manually" lock in an enhanced guarantee once per
"benefit year" (i.e., a year beginning on the date you acquired the benefit
and each anniversary thereafter) if your Account Value on that Valuation Day
exceeds the amount of any outstanding base guarantee or enhanced guarantee. If
you elect to manually lock-in an enhanced guarantee on an anniversary of the
effective date of the benefit, that lock-in will not count toward the one
elective manual lock-in you may make each benefit year. We guarantee that the
Account Value locked-in by that enhanced guarantee will not be any less seven
years later, and each anniversary of that date thereafter. In addition, you
may elect an automatic enhanced guarantee feature under which, if your Account
Value on a benefit anniversary exceeds the highest existing guarantee by 7% or
more, we guarantee that such Account Value will not be any less seven benefit
anniversaries later and each benefit anniversary thereafter. You may maintain
only one enhanced guarantee in addition to your base guarantee. Thus, when a
new enhanced guarantee is created, it cancels any existing enhanced guarantee.
However, the fact that an enhanced guarantee was effected automatically on a
benefit anniversary does not prevent you from "manually" locking-in an
enhanced guarantee during the ensuing benefit year. Conversely, the fact that
you "manually" locked in an enhanced guarantee does not preclude the
possibility of an automatic enhanced guarantee on the subsequent benefit
anniversary. Please note that upon creation of a new enhanced guarantee, an
immediate transfer to an AST bond portfolio Sub-account (which is used as part
of this benefit) may occur depending on the discount rate (as described below)
used to determine the present value of each of your guarantees. You may elect
to terminate an enhanced guarantee without also terminating the base
guarantee. If you do, any amounts held in the AST bond portfolio Sub-account
with respect to that enhanced guarantee will be transferred to your other
Sub-accounts in accordance with your most recent allocation instructions (see
below "Key Feature - Allocation of Account Value"). Amounts held in an AST
bond portfolio Sub-account with respect to the base guarantee will not be
transferred as a result of the termination of an enhanced guarantee. You may
not lock in an enhanced guarantee, either manually or through our optional
automatic program, within seven years of the date by which annuity payments
must commence under the terms of your Annuity (please see "How and When Do I
Choose The Annuity Payment Option?" for further information on your maximum
Annuity Date). The inability to lock in an enhanced guarantee referenced in
the immediately preceding sentence also applies to a new Owner who has
acquired the Annuity from the original Owner.
In general, we refer to a date on which the Account Value is guaranteed to be
present as the "maturity date". If the Account Value on the maturity date is
less than the guaranteed amount, we will contribute funds from our general
account to bring your Account Value up to the guaranteed amount. If the
maturity date is not a Valuation Day, then we would contribute such an amount
on the next Valuation Day. We will allocate any such amount to each
Sub-account (other than the AST bond portfolio Sub-account used with this
benefit and described below) in accordance with your most recent allocation
instructions. Regardless of whether we need to contribute funds at the end of
a guarantee period, we will at that time transfer all amounts held within the
AST bond portfolio Sub-account associated with the maturing guarantee to your
other Sub-accounts on a pro rata basis, unless your Account Value is being
allocated according to an asset allocation program, in such case your Account
Value will be transferred according to the program. The guarantees provided by
the benefit exist only on the applicable maturity date(s). However, due to the
ongoing monitoring of your Account Value, and the transfer of Account Value to
support our future guarantees, the benefit may provide some protection from
significant Sub-account losses. For this same reason, the benefit may limit
your ability to benefit from Sub-account increases while it is in effect.
We increase both the base guarantee and any enhanced guarantee by the amount
of each Purchase Payment made subsequent to the date that the guarantee was
established. For example, if the effective date of the benefit was January 1,
2010 and the Account Value was $100,000 on that date, then a $30,000 Purchase
Payment made on March 30, 2011 would increase the base guarantee amount to
$130,000.
If you make a withdrawal, we effect a proportional reduction to each existing
guarantee amount. We calculate a proportional reduction by reducing each
existing guarantee amount by the percentage represented by the ratio of the
withdrawal amount to your Account Value immediately prior to the withdrawal.
If you make a withdrawal, we will deduct the withdrawal amount pro rata from
each of your Sub-accounts (including the AST bond portfolio Sub-account used
with this benefit).
Any partial withdrawal for payment of any third party investment advisory
service will be treated as a withdrawal, and will reduce each guarantee amount
proportionally, in the manner indicated above.
EXAMPLE
This example is purely hypothetical and does not reflect the charges for the
benefit or any other fees and charges under the Annuity. It is intended to
illustrate the proportional reduction of a withdrawal on each guarantee amount
under this benefit.
Assume the following:
.. The Issue Date is December 1, 2010
.. The benefit is elected on December 1, 2010
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.. The Account Value on December 1, 2010 is $200,000, which results in a base
guarantee of $200,000
.. An enhanced guarantee amount of $300,000 is locked in on December 1, 2011
.. The Account Value immediately prior to the withdrawal is equal to $300,000
If a withdrawal of $50,000 is taken on December 15, 2011, all guarantee
amounts will be reduced by the ratio the total withdrawal amount represents of
the Account Value just prior to the withdrawal being taken.
HERE IS THE CALCULATION (FIGURES ARE ROUNDED):
Withdrawal Amount $ 50,000
Divided by Account Value before withdrawal $300,000
Equals ratio 16.67%
All guarantees will be reduced by the above ratio (16.67%)
Base guarantee amount $166,667
Enhanced guarantee amount $250,000
KEY FEATURE - ALLOCATION OF ACCOUNT VALUE
We limit the Sub-accounts to which you may allocate Account Value if you elect
GRO Plus II. For purposes of this benefit, we refer to those permitted
investment options (other than the required bond portfolio Sub-accounts
discussed below) as the "Permitted Sub-accounts."
GRO Plus II uses a predetermined mathematical formula to help manage your
guarantees through all market cycles. Because the formula is made part of your
Rider schedule supplement, the formula applicable to you may not be altered
once you elect the benefit. However, subject to regulatory approval, we do
reserve the right to amend the formula for newly-issued Annuities that elect
or re-elect GRO Plus II and for existing Annuities that elect the benefit
post-issue. This required formula helps us manage our financial exposure under
GRO Plus II, by moving assets out of certain Sub-accounts if dictated by the
formula (see below). In essence, we seek to preserve the value of these
assets, by transferring them to a more stable option (i.e., one or more
specified bond portfolios of Advanced Series Trust). We refer to the
Sub-accounts corresponding to these bond portfolios collectively as the "AST
bond portfolio Sub-accounts". The formula also contemplates the transfer of
Account Value from an AST bond portfolio Sub-account to the other Sub-accounts
in certain other scenarios. The formula is set forth in Appendix Q of this
prospectus, and applies to both (a) GRO Plus II and (b) elections of HD GRO II
made prior to July 16, 2010. A summary description of each AST bond portfolio
Sub-account appears within the section entitled "What Are The Investment
Objectives and Policies Of The Portfolios?". You can find a copy of the AST
bond portfolio prospectus by going to www.prudentialannuities.com.
For purposes of operating the GRO Plus II formula, we have included within
this Annuity several AST bond portfolio Sub-accounts. Each AST bond portfolio
is unique, in that its underlying investments generally mature at different
times. For example, there would be an AST bond portfolio whose underlying
investments generally mature in 2020, an AST bond portfolio whose underlying
investments generally mature in 2021, and so forth. As discussed below, the
formula determines the appropriate AST bond portfolio Sub-Account to which
Account Value is transferred. We will introduce new AST bond portfolio
Sub-accounts in subsequent years, to correspond generally to the length of new
guarantee periods that are created under this benefit (and the Highest Daily
GRO benefits). If you have elected GRO Plus II, you may have Account Value
allocated to an AST bond portfolio Sub-account only by operation of the
predetermined mathematical formula, and thus you may not allocate purchase
payments to or make transfers to or from such a Sub-account. Please see the
prospectus for the Advanced Series Trust for more information about each AST
bond portfolio used with this benefit.
Although we employ several AST bond portfolio Sub-accounts for purposes of the
benefit, the formula described in the next paragraph operates so that your
Account Value may be allocated to only one AST bond portfolio Sub-account at
one time. On any day a transfer into or out of the AST bond portfolio
Sub-account is made the formula may dictate that a transfer out of one AST
bond portfolio Sub-account be made into another AST bond portfolio
Sub-account. Any transfer into an AST bond portfolio Sub-account will be
directed to the AST bond portfolio Sub-account associated with the "current
liability", as described below. As indicated, the AST bond portfolio
Sub-accounts are employed with this benefit to help us mitigate the financial
risks under our guarantee. Thus, in accordance with the formula applicable to
you under the benefit, we determine which AST bond portfolio Sub-account your
Account Value is transferred to, and under what circumstances a transfer is
made. Please note that upon creation of a new enhanced guarantee, an immediate
transfer to the AST Bond Portfolio Sub-account associated with the "current
liability" may occur, depending on the discount rate (as described in the next
paragraph) used to determine the present value of each of your guarantees. As
such, a low discount rate could cause a transfer of Account Value into an AST
bond portfolio Sub-account, despite the fact that your Account Value had
increased.
In general, the formula works as follows. On each Valuation Day, the formula
automatically performs an analysis with respect to each guarantee that is
outstanding. For each outstanding guarantee, the formula begins by determining
the present value on that Valuation Day that, if appreciated at the applicable
"discount rate", would equal the applicable guarantee amount on the maturity
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date. As detailed in the formula, the discount rate is an interest rate
determined by taking a benchmark index used within the financial services
industry and then reducing that interest rate by a prescribed adjustment. Once
selected, we do not change the applicable benchmark index (although we do
reserve the right to use a new benchmark index if the original benchmark is
discontinued). The greatest of each such present value is referred to as the
"current liability" in the formula. The formula compares the current liability
to the amount of your Account Value held within the AST bond portfolio
Sub-account and to your Account Value held within the Permitted Sub-accounts.
If the current liability, reduced by the amount held within the AST bond
portfolio Sub-account, and divided by the amount held within the Permitted
Sub-accounts, exceeds an upper target value (currently, 85%), then the formula
will make a transfer into the AST bond portfolio Sub-account, in the amount
dictated by the formula (subject to the 90% cap discussed below). If the
current liability, reduced by the amount held within the AST bond portfolio
Sub-account, and divided by the amount within your other Sub-accounts, is less
than a lower target value (currently, 79%), then the formula will transfer
Account Value within the AST bond portfolio Sub-account into the Permitted
Sub-accounts in the amount dictated by the formula.
The formula will not execute a transfer to the AST bond portfolio Sub-account
that results in more than 90% of your Account Value being allocated to the AST
bond portfolio Sub-account ("90% cap"). Thus, on any Valuation Day, if the
formula would require a transfer to the AST bond portfolio Sub-account that
would result in more than 90% of the Account Value being allocated to the AST
bond portfolio Sub-account, only the amount that results in exactly 90% of the
Account Value being allocated to the AST bond portfolio Sub-account will be
transferred. Additionally, future transfers into the AST bond portfolio
Sub-account will not be made (regardless of the performance of the AST bond
portfolio Sub-account and the Permitted Sub-accounts) at least until there is
first a transfer out of the AST bond portfolio Sub-account. Once this transfer
occurs out of the AST bond portfolio Sub-account, future amounts may be
transferred to or from the AST bond portfolio Sub-account if dictated by the
formula (subject to the 90% cap). At no time will the formula make a transfer
to the AST bond portfolio Sub-account that results in greater than 90% of your
Account Value being allocated to the AST bond portfolio Sub-account. However,
it is possible that, due to the investment performance of your allocations in
the AST bond portfolio Sub-account and your allocations in the Permitted
Sub-accounts you have elected, your Account Value could be more than 90%
invested in the AST bond portfolio Sub-account. If you make additional
purchase payments to your Annuity while the 90% cap is in effect, the formula
will not transfer any of such additional purchase payments to the AST bond
portfolio Sub-account at least until there is first a transfer out of the AST
bond portfolio Sub-account, regardless of how much of your Account Value is in
the Permitted Sub-accounts. This means that there could be scenarios under
which, because of the additional purchase payments you make, less than 90% of
your entire Account Value is allocated to the AST bond portfolio Sub-account,
and the formula will still not transfer any of your Account Value to the AST
bond portfolio Sub-account (at least until there is first a transfer out of
the AST bond portfolio Sub-account).
For example,
.. March 19, 2010 - a transfer is made to the AST bond portfolio Sub-account
that results in the 90% cap being met and now $90,000 is allocated to the
AST bond portfolio Sub-account and $10,000 is allocated to the Permitted
Sub-accounts.
.. March 20, 2010 - you make an additional purchase payment of $10,000. No
transfers have been made from the AST bond portfolio Sub-account to the
Permitted Sub-accounts since the cap went into effect on March 19, 2010.
.. On March 20, 2010 (and at least until first a transfer is made out of the
AST bond portfolio Sub-account under the formula) - the $10,000 payment is
allocated to the Permitted Sub-accounts and on this date you have 82% in
the AST bond portfolio Sub-account and 18% in the Permitted Sub-accounts
(such that $20,000 is allocated to the Permitted Sub-accounts and $90,000
to the AST bond portfolio Sub-account).
.. Once there is a transfer out of the AST bond portfolio Sub-account (of any
amount), the formula will operate as described above, meaning that the
formula could transfer amounts to or from the AST bond portfolio
Sub-account if dictated by the formula (subject to the 90% cap).
Under the operation of the formula, the 90% cap may come into existence and be
removed multiple times while you participate in the benefit. We will continue
to monitor your Account Value daily and, if dictated by the formula,
systematically transfer amounts between the Permitted Sub-accounts you have
chosen and the AST bond portfolio Sub-account as dictated by the formula.
As discussed above, each Valuation Day, the formula analyzes the difference
between your Account Value and your guarantees, as well as how long you have
owned the benefit, and determines if any portion of your Account Value needs
to be transferred into or out of the AST bond portfolio Sub-accounts.
Therefore, at any given time, some, none, or most of your Account Value may be
allocated to the AST bond portfolio Sub-accounts.
Each market cycle is unique, therefore the performance of your Sub-accounts,
and its impact on your Account Value, will differ from market cycle to market
cycle producing different transfer activity under the formula. The amount and
timing of transfers to and from the AST bond portfolio Sub-accounts pursuant
to the formula depend on various factors unique to your Annuity and are not
necessarily directly correlated with the securities markets, bond markets,
interest rates or any other market or index. Some of the factors that
determine the amount and timing of transfers (as applicable to your Annuity),
include:
.. The difference between your Account Value and your guarantee amount(s);
.. The amount of time until the maturity of your guarantee(s);
.. The amount invested in, and the performance of, the Permitted Sub-accounts;
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.. The amount invested in, and the performance of, the AST bond portfolio
Sub-accounts;
.. The discount rate used to determine the present value of your guarantee(s);
.. Additional purchase payments, if any, that you make to the Annuity; and
.. Withdrawals, if any, taken from the Annuity.
Any amounts invested in the AST bond portfolio Sub-accounts will affect your
ability to participate in a subsequent market recovery within the Permitted
Sub-accounts. Conversely, the Account Value may be higher at the beginning of
the market recovery, e.g. more of the Account Value may have been protected
from decline and volatility than it otherwise would have been had the benefit
not been elected. The AST bond portfolio Sub-accounts are available only with
these benefits, and you may not allocate purchase payments to or transfer
Account Value to or from the AST bond portfolio Sub-accounts.
Transfers under the formula do not impact any guarantees under the benefit
that have already been locked-in.
ELECTION/CANCELLATION OF THE BENEFIT
GRO Plus II can be elected on the Issue Date of your Annuity, or on any
Valuation Day thereafter, provided that your Account Value is allocated in a
manner permitted with the benefit and that you otherwise meet our eligibility
rules. You may elect GRO Plus II only if the oldest of the Owner and Annuitant
is 84 or younger on the date of election (80 or younger, in New York). If you
currently participate in a living benefit that may be cancelled, you may
terminate that benefit at any time and elect GRO Plus II. However you will
lose all guarantees that you had accumulated under those benefits. The base
guarantee under GRO Plus II will be based on your current Account Value at the
time the new benefit becomes effective on your Annuity.
GRO Plus II will terminate automatically upon: (a) the death of the Owner or
the Annuitant (in an entity owned contract), unless the Annuity is continued
by the surviving spouse; (b) as of the date Account Value is applied to begin
annuity payments; (c) as of the anniversary of benefit election that
immediately precedes the contractually-mandated latest annuity date, or
(d) upon full surrender of the Annuity. If you elect to terminate the benefit,
GRO Plus II will no longer provide any guarantees. The charge for the GRO Plus
II benefit will no longer be deducted from your Account Value upon termination
of the benefit.
If you wish, you may cancel the GRO Plus II benefit. You may also cancel an
enhanced guarantee, but leave the base guarantee intact. Upon cancellation,
you may elect any other currently available living benefit beginning on the
next Valuation Day after you have cancelled the GRO Plus II benefit, provided
that your Account Value is allocated in a manner permitted with the benefit
and that you otherwise meet our eligibility rules. Upon cancellation of the
GRO Plus II benefit, any Account Value allocated to the AST bond portfolio
Sub-account used with the formula will be reallocated to the Permitted
Sub-Accounts according to your most recent allocation instructions or, in
absence of such instructions, pro rata (i.e., in direct proportion to your
current allocations). Upon your re-election of GRO Plus II, Account Value may
be transferred between the AST bond portfolio Sub-accounts and the Permitted
Sub-accounts according to the predetermined mathematical formula (see "Key
Feature - Allocation of Account Value" above for more details). It is possible
that over time the formula could transfer some, none, or most of the Account
Value to the AST bond portfolio Sub-accounts under GRO Plus II. YOU ALSO
SHOULD BE AWARE THAT UPON CANCELLATION OF THE GRO PLUS II BENEFIT, YOU WILL
LOSE ALL GUARANTEES THAT YOU HAD ACCUMULATED UNDER THE BENEFIT. THUS, THE
GUARANTEES UNDER ANY NEWLY-ELECTED BENEFIT WILL BE BASED ON YOUR CURRENT
ACCOUNT VALUE AT BENEFIT EFFECTIVENESS. THE BENEFIT YOU ELECT OR RE-ELECT MAY
BE MORE EXPENSIVE THAN THE BENEFIT YOU CANCEL. ONCE THE GRO PLUS II BENEFIT IS
CANCELED YOU ARE NOT REQUIRED TO RE-ELECT ANOTHER OPTIONAL LIVING BENEFIT AND
ANY SUBSEQUENT BENEFIT ELECTION MAY BE MADE ON OR AFTER THE FIRST VALUATION
DAY FOLLOWING THE CANCELLATION OF THE GRO PLUS II BENEFIT PROVIDED THAT THE
BENEFIT YOU ARE LOOKING TO ELECT IS AVAILABLE ON A POST-ISSUE BASIS.
SPECIAL CONSIDERATIONS UNDER GRO PLUS II
This benefit is subject to certain rules and restrictions, including, but not
limited to the following:
.. Upon inception of the benefit, 100% of your Account Value must be allocated
to the Permitted Sub-accounts. The Permitted Sub-accounts are those
described in the Investment Options section of this prospectus. No fixed
interest rate allocations may be in effect as of the date that you elect to
participate in the benefit.
.. Transfers to and from your elected Sub-accounts and an AST bond portfolio
Sub-account will not count toward the maximum number of free transfers
allowable under the Annuity.
.. Any amounts applied to your Account Value by us on a maturity date will not
be treated as "investment in the contract" for income tax purposes.
.. As the time remaining until the applicable maturity date gradually
decreases, the benefit may become increasingly sensitive to moves to an AST
bond portfolio Sub-account.
.. We currently limit the Sub-accounts to which you may allocate Account Value
if you participate in this benefit. Moreover, if you are invested in
prohibited investment options and seek to acquire the benefit, we will ask
you to reallocate to permitted investment options as a prerequisite to
acquiring the benefit. Should we prohibit access to any investment option,
any transfers required to move Account Value to eligible investment options
will not be counted in determining the number of free transfers during an
Annuity Year.
.. If you elect this benefit, and in connection with that election you are
required to reallocate to different investment options permitted under this
benefit, then on the Valuation Day on which we receive your request in Good
Order, we will (i) sell units
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of the non-permitted investment options and (ii) invest the proceeds of
those sales in the permitted investment options that you have designated.
During this reallocation process, your Account Value allocated to the
Sub-accounts will remain exposed to investment risk, as is the case
generally. The protection afforded by the newly-elected benefit will not
arise until the close of business on the following Valuation Day.
CHARGES UNDER THE BENEFIT
We deduct an annualized charge equal to 0.60% of the average daily net assets
of the Sub-accounts (including any AST bond portfolio Sub-account) for
participation in the GRO Plus II benefit. The annual charge is deducted daily.
The charge is deducted to compensate us for: (a) the risk that your Account
Value on a maturity date is less than the amount guaranteed and
(b) administration of the benefit. You will begin paying this charge as of the
effective date of the benefit. We will not refund the charges you have paid
even if we never have to make any payments under the benefit.
HIGHEST DAILY GUARANTEED RETURN OPTION (HD GRO)
We no longer permit new elections of Highest Daily GRO.
Highest Daily GRO creates a series of separate guarantees, each of which is
based on the highest Account Value attained on a day during the applicable
time period. As each year of your participation in the benefit passes, we
create a new guarantee. Each guarantee then remains in existence until the
date on which it matures (unless the benefit terminates sooner). We refer to
each date on which the specified Account Value is guaranteed as the "maturity
date" for that guarantee. Highest Daily GRO will not create a guarantee if the
maturity date of that guarantee would extend beyond the date by which annuity
payments must commence under the terms of your Annuity. This is true even with
respect to a new Owner who has acquired the Annuity from the original Owner.
The guarantees provided by the benefit exist only on the applicable maturity
date(s). However, due to the ongoing monitoring of your Account Value, and the
transfer of Account Value to support our future guarantees, the benefit may
provide some protection from significant Sub-account losses if you choose to
surrender your Annuity or begin receiving annuity payments prior to a maturity
date. For this same reason, the benefit may limit your ability to benefit from
Sub-account increases while it is in effect.
The initial guarantee is created on the day that the Highest Daily GRO benefit
is added to your Annuity. We guarantee that your Account Value on the tenth
anniversary of that day (we refer to each such anniversary as a "benefit
anniversary") will not be less than your Account Value on the day that the
Highest Daily GRO benefit was added to your Annuity. Each benefit anniversary
thereafter, we create a new guarantee. With respect to each such subsequent
guarantee, we identify the highest Account Value that occurred between the
date of that benefit anniversary and the date on which Highest Daily GRO was
added to your Annuity. We guarantee that your Account Value ten years after
that benefit anniversary will be no less than the highest daily Account Value
that occurred during that time period. The following example illustrates the
time period over which we identify the highest daily Account Value for
purposes of each subsequent guarantee under the benefit. If the date of
benefit election were January 1, 2009, we would create a guarantee on
January 1, 2012 based on the highest Account Value achieved between January 1,
2009 and January 1, 2012, and that guarantee would mature on January 1, 2022.
As described below, we adjust each of the guarantee amounts for purchase
payments and withdrawals.
In general, we refer to a date on which the Account Value is guaranteed to be
present as the "maturity date". If the Account Value on the maturity date is
less than the guaranteed amount, we will contribute funds from our general
account to bring your Account Value up to the guaranteed amount. If the
maturity date is not a Valuation Day, then we would contribute such an amount
on the next Valuation Day. We will allocate any such amount to each
Sub-account (other than the "Current AST bond portfolio Sub-account" described
below) in accordance with your current allocations instructions. Regardless of
whether we need to contribute funds at the end of a guarantee period, we will
at that time transfer all amounts held within the AST bond portfolio
Sub-account associated with the maturing guarantee to your other Sub-accounts,
on a pro rata basis. If the entire account value is invested in the AST bond
portfolio Sub-account, we will allocate according to your current allocation
instructions.
We increase the amount of each guarantee that has not yet reached its maturity
date, as well as the highest daily Account Value that we calculate to
establish a guarantee, by the amount of each Purchase Payment made prior to
the applicable maturity date. For example, if the effective date of the
benefit was January 1, 2009, and there was an initial guaranteed amount that
was set at $100,000 maturing January 1, 2019, and a second guaranteed amount
that was set at $120,000 maturing January 1, 2020, then a $30,000 Purchase
Payment made on March 30, 2010 would increase the guaranteed amounts to
$130,000 and $150,000, respectively. As illustrated in the examples below,
additional Purchase Payments also increase an amount we refer to as the
"dollar-for-dollar corridor."
We reflect the effect of withdrawals by reference to an amount called the
"dollar-for-dollar corridor." The dollar-for-dollar corridor is set initially
to equal 5% of the initial guaranteed amount (i.e., 5% of the Account Value at
benefit election). Each "benefit year" (i.e., a year that begins on the date
of election of Highest Daily GRO and each anniversary thereafter), withdrawals
that you make that are equal to or less than the dollar-for-dollar corridor
reduce (i) the amount of the dollar-for-dollar corridor for that benefit year
(ii) the amount of each outstanding guarantee amount, and (iii) the highest
daily Account Value that we calculate to establish a
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guarantee, by the exact amount of the withdrawal. However, if you withdraw
more than the dollar-for-dollar corridor in a given benefit year, we use the
portion of the withdrawal that exceeded the dollar-for-dollar corridor to
effect a proportional reduction to both the dollar-for-dollar corridor itself
and each outstanding guaranteed amount, as well as the highest daily Account
Value that we calculate to establish a guarantee. We calculate a proportional
reduction by (i) identifying the amount of the withdrawal that exceeded the
dollar-for-dollar corridor (the "excess withdrawal") (ii) subtracting the
dollar-for-dollar amount from the Account Value prior to the withdrawal
(iii) dividing the excess withdrawal by the amount in (ii). We then use the
resulting proportion to reduce each of the guaranteed amount, the highest
daily Account Value that we calculate to establish a guarantee, and the dollar
for dollar corridor itself. See examples of this calculation below.
Any partial withdrawals in payment of any third party investment advisory
service will be treated as withdrawals, and will reduce each applicable
guaranteed amount and the dollar-for-dollar corridor in the manner indicated
above.
EXAMPLES
The following examples of dollar-for-dollar and proportional reductions assume
that: 1.) the Issue Date and the effective date of the Highest Daily GRO
benefit are October 13, 2008; 2.) an initial Purchase Payment of $250,000; 3.)
an initial guarantee amount of $250,000; and 4.) a dollar-for-dollar limit of
$12,500 (5% of $250,000). The values set forth here are purely hypothetical
and do not reflect the charge for Highest Daily GRO or other fees and charges.
EXAMPLE 1. DOLLAR-FOR-DOLLAR REDUCTION
A $10,000 withdrawal is taken on November 29, 2008 (in the first Annuity
Year). No prior withdrawals have been taken. As the amount withdrawn is less
than the Dollar-for-dollar Limit:
.. The initial guarantee amount is reduced by the amount withdrawn (i.e., by
$10,000, from $250,000 to $240,000).
.. The remaining dollar-for-dollar limit ("Remaining Limit") for the balance
of the first Annuity Year is also reduced by the amount withdrawn (from
$12,500 to $2,500).
EXAMPLE 2. DOLLAR-FOR-DOLLAR AND PROPORTIONAL REDUCTIONS
A second $10,000 withdrawal is taken on December 18, 2008 (still within the
first Annuity Year). The Account Value immediately before the withdrawal is
$180,000. As the amount withdrawn exceeds the Remaining Limit of $2,500 from
Example 1:
.. the initial guarantee amount is first reduced by the Remaining Limit (from
$240,000 to $237,500);
.. The result is then further reduced by the ratio of A to B, where:
-- A is the amount withdrawn less the Remaining Limit ($10,000 - $2,500, or
$7,500).
-- B is the Account Value less the Remaining Limit ($180,000 - $2,500, or
$177,500).
The resulting initial guarantee amount is: $237,500 X (1 - $7,500 / $177,500),
or $227,464.79.
.. The Remaining Limit is set to zero (0) for the balance of the first Annuity
Year.
The resulting dollar-for-dollar corridor for the next Annuity Year is
calculated by multiplying the prior dollar-for-dollar corridor by the same
ratio by which we reduce the Guarantee Amount above: $12,500 X (1 - $7,500 /
$177,500), or $11,971.83.
KEY FEATURE - ALLOCATION OF ACCOUNT VALUE
HD GRO uses a predetermined mathematical formula to help manage your
guarantees through all market cycles. The formula applicable to you may not be
altered once you elect the benefit. This required formula helps us manage our
financial exposure under HD GRO, by moving assets out of certain Sub-accounts
if dictated by the formula (see below). In essence, we seek to preserve
Account Value, by transferring it to a more stable option (i.e., one or more
specified bond portfolios of Advanced Series Trust). We refer to the
Sub-accounts corresponding to these bond portfolios collectively as the "AST
bond portfolio Sub-accounts". The formula also contemplates the transfer of
Account Value from an AST bond portfolio Sub-account to the other
Sub-accounts. The formula is set forth in Appendix R of this prospectus. A
summary description of each AST bond portfolio Sub-account appears within the
prospectus section entitled "Investment Options." In addition, you can find a
copy of the AST bond portfolio prospectus by going to
www.prudentialannuities.com.
For purposes of operating the HD GRO formula, we have included within each
Annuity several AST bond portfolio Sub-accounts. Each AST bond portfolio is
unique, in that its underlying investments generally mature at different
times. For example, there would be an AST bond portfolio whose underlying
investments generally mature in 2020, an AST bond portfolio whose underlying
investments generally mature in 2021, and so forth. As discussed below, the
formula determines the appropriate AST bond portfolio Sub-account to which
Account Value is transferred. We will introduce new AST bond portfolio
Sub-accounts in subsequent years, to correspond generally to the length of new
guarantee periods that are created under this benefit. If you have elected HD
GRO, you may have Account Value allocated to an AST bond portfolio Sub-account
only by operation of the formula, and thus you may not allocate Purchase
Payments to or make transfers to or from an AST bond portfolio Sub-account.
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Although we employ several AST bond portfolio Sub-accounts for purposes of the
benefit, the formula described in the next paragraph operates so that your
Account Value may be allocated to only one AST bond portfolio Sub-account at
one time. The formula determines the appropriate AST bond portfolio
Sub-account to which Account Value is transferred. On any day a transfer into
or out of the AST bond portfolio Sub-account is made, the formula may dictate
that a transfer out of one AST bond portfolio Sub-account be made into another
AST bond portfolio Sub-account. Any transfer into an AST bond portfolio
Sub-account will be directed to the AST bond portfolio Sub-account associated
with the "current liability", as described below. In the formula, we use the
term "Transfer Account" to refer to the AST bond portfolio Sub-account to
which a transfer would be made. As indicated, the formula and AST bond
portfolio Sub-accounts are employed with this benefit to help us mitigate the
financial risks under our guarantee. Thus, the formula applicable to you under
the benefit determines which AST bond portfolio Sub-account your Account Value
is transferred to, and under what circumstances a transfer is made.
In general, the formula works as follows. Under the formula, Account Value
will transfer between the "Permitted Sub-accounts" and an AST bond portfolio
Sub-account when dictated by the pre-determined mathematical formula. On each
Valuation Day, including the effective date of the benefit, the pre-determined
mathematical formula is used to compare your Account Value to an amount based
on the guarantees provided under the benefit. The formula determines whether a
transfer occurs based, among other things, on an identification of the
outstanding guarantee that has the largest present value. Based on the
formula, a determination is made as to whether any portion of your Account
Value is to be transferred to or from the AST bond portfolio Sub-account. In
identifying those guarantees, we consider each guarantee that already has been
set (i.e., on a benefit anniversary), as well as an amount that we refer to as
the "Projected Future Guarantee." The "Projected Future Guarantee" is an
amount equal to the highest Account Value (adjusted for withdrawals and
additional Purchase Payments, as described in the section of the prospectus
concerning HD GRO) within the current benefit year that would result in a new
guarantee. For the Projected Future Guarantee, the assumed Guarantee Period
begins on the current Valuation Day and ends 10 years from the next
anniversary of the effective date of the benefit. As such, a Projected Future
Guarantee could cause a transfer of Account Value into an AST bond portfolio
Sub-account. We only calculate a Projected Future Guarantee if the assumed
Guarantee Period associated with that Projected Future Guarantee does not
extend beyond the latest Annuity Date applicable to the Annuity. The amount
that is transferred to and from the AST bond portfolio Sub-accounts pursuant
to the formula depends upon the factors set forth in the bullet points below,
some of which relate to the guarantee amount(s), including the Projected
Future Guarantee.
For each outstanding guarantee and the Projected Future Guarantee, the formula
begins by determining the present value on that Valuation Day that, if
appreciated at the applicable "discount rate", would equal the applicable
guarantee amount on the Maturity Date. As detailed in the formula, the
discount rate is an interest rate determined by taking a benchmark index used
within the financial services industry and then reducing that interest rate by
a prescribed adjustment. Once selected, we do not change the applicable
benchmark index (although we do reserve the right to use a new benchmark index
if the original benchmark is discontinued). The greatest of each such present
value is referred to as the "current liability" in the formula. The formula
compares the current liability to the amount of your Account Value held within
the AST bond portfolio Sub-account and to your Account Value held within the
Permitted Sub-accounts. If the current liability, reduced by the amount held
within the current AST bond portfolio Sub-account, and divided by the amount
held within the Permitted Sub-accounts, exceeds an upper target value
(currently, 85%), then the formula will make a transfer into the AST bond
portfolio Sub-account, in the amount dictated by the formula (subject to the
90% cap feature discussed below). If the current liability, reduced by the
amount held within the AST bond portfolio Sub-account, and divided by the
amount within the Permitted Sub-accounts, is less than a lower target value
(currently, 79%), then the formula will transfer Account Value from the AST
bond portfolio Sub-account into the Permitted Sub-accounts, in the amount
dictated by the formula.
As discussed above, each Valuation Day, the formula analyzes the difference
between your Account Value and your guarantees as well as how long you have
owned the benefit, and determines if any portion of your Account Value needs
to be transferred into or out of the AST bond portfolio Sub-accounts. Where
you have not elected the 90% cap feature, at any given time, some, none, or
all of your Account Value may be allocated to an AST bond portfolio
Sub-account. For such elections, if your entire Account Value is transferred
to an AST bond portfolio Sub-account, then based on the way the formula
operates, the formula will not transfer amounts out of the AST bond portfolio
Sub-account and the entire Account Value would remain in the AST bond
portfolio Sub-account. If you make additional Purchase Payments to your
Annuity, they will be allocated to the Sub-accounts according to your
allocation instructions. Such additional Purchase Payments may or may not
cause the formula to transfer money into or out of the AST bond portfolio
Sub-account. Once the Purchase Payments are allocated to your Annuity, they
also will be subject to the formula, which may result in immediate transfers
to or from the AST bond portfolio Sub-accounts, if dictated by the formula. If
you have elected the 90% cap feature discussed below, at any given time, some,
none, or most of your Account Value may be allocated to the AST bond portfolio
Sub-accounts.
Each market cycle is unique, therefore the performance of your Sub-accounts,
and its impact on your Account Value, will differ from market cycle to market
cycle producing different transfer activity under the formula. The amount and
timing of transfers to and from the AST bond portfolio Sub-accounts pursuant
to the formula depend on various factors unique to your Annuity and are not
necessarily directly correlated with the securities markets, bond markets,
interest rates or any other market or index. Some of the factors that
determine the amount and timing of transfers (as applicable to your Annuity),
include:
.. The difference between your Account Value and your guarantee amount(s);
.. The amount of time until the maturity of your guarantee(s);
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.. The amount invested in, and the performance of, the Permitted Sub-accounts;
.. The amount invested in, and the performance of, the AST bond portfolio
Sub-accounts;
.. The discount rate used to determine the present value of your guarantee(s);
.. Additional Purchase Payments, if any, that you make to the Annuity; and
.. Withdrawals, if any, taken from the Annuity.
Any amounts invested in the AST bond portfolio Sub-accounts will affect your
ability to participate in a subsequent market recovery within the Permitted
Sub-accounts. Conversely, the Account Value may be higher at the beginning of
the market recovery, e.g. more of the Account Value may have been protected
from decline and volatility than it otherwise would have been had the benefit
not been elected. The AST bond portfolio Sub-accounts are available only with
certain optional living benefits, and you may not allocate Purchase Payments
to or transfer Account Value to or from the AST bond portfolio Sub-accounts.
ELECTION/CANCELLATION OF THE BENEFIT
We no longer permit new elections of Highest Daily GRO. If you currently
participate in Highest Daily GRO, your existing guarantees are unaffected by
the fact that we no longer offer Highest Daily GRO.
If you wish, you may cancel the Highest Daily GRO benefit. You may then elect
any other currently available living benefit, which is available to be added
post issue on any Valuation Day after you have cancelled the Highest Daily GRO
benefit, provided the request is received in good order (subject to state
availability and in accordance with any applicable age requirements). Upon
cancellation of the Highest Daily GRO benefit, any Account Value allocated to
the AST Bond Portfolio Sub-accounts used with the formula will be reallocated
to the Permitted Sub-Accounts according to your most recent allocation
instructions or, in absence of such instructions, pro-rata. Upon your election
of another living benefit, Account Value may be transferred between the AST
Bond Portfolio Sub-accounts or, depending on the benefits selected, the AST
Investment Grade Bond Portfolio, and the Permitted Sub-accounts according to a
pre-determined mathematical formula used with that benefit. It is possible
that over time the formula could transfer some, most, or none of the Account
Value to the AST Bond Portfolio Sub-accounts or, depending on the benefits
selected, the AST Investment Grade Bond Portfolio, under the newly-elected
benefit. YOU ALSO SHOULD BE AWARE THAT UPON CANCELLATION OF THE HIGHEST DAILY
GRO BENEFIT, YOU WILL LOSE ALL GUARANTEES THAT YOU HAD ACCUMULATED UNDER THE
BENEFIT. THUS, THE GUARANTEES UNDER YOUR NEWLY-ELECTED BENEFIT WILL BE BASED
ON YOUR CURRENT ACCOUNT VALUE. THE BENEFIT YOU ELECT OR RE-ELECT MAY BE MORE
EXPENSIVE THAN THE BENEFIT YOU CANCEL. ONCE THE HIGHEST DAILY GRO BENEFIT IS
CANCELED YOU ARE NOT REQUIRED TO RE-ELECT ANOTHER OPTIONAL LIVING BENEFIT AND
ANY SUBSEQUENT BENEFIT ELECTION MAY BE MADE ON OR AFTER THE FIRST VALUATION
DAY FOLLOWING THE CANCELLATION OF THE HIGHEST DAILY GRO BENEFIT PROVIDED THAT
THE BENEFIT YOU ARE LOOKING TO ELECT IS AVAILABLE ON A POST-ISSUE BASIS.
Highest Daily GRO will terminate automatically upon: (a) the death of the
Owner or the Annuitant (in an entity owned contract), unless the Annuity is
continued by the surviving spouse; (b) as of the date Account Value is applied
to begin annuity payments; (c) as of the anniversary of benefit election that
immediately precedes the contractually-mandated latest annuity date, or
(d) upon full surrender of the Annuity. If you elect to terminate the benefit,
Highest Daily GRO will no longer provide any guarantees. The charge for the
Highest Daily GRO benefit will no longer be deducted from your Account Value
upon termination of the benefit.
SPECIAL CONSIDERATIONS UNDER HIGHEST DAILY GRO
This benefit is subject to certain rules and restrictions, including, but not
limited to the following:
.. Upon inception of the benefit, 100% of your Account Value must have been
allocated to the Permitted Sub-accounts. The Permitted Sub-accounts are
those described in the Investment Option section of this prospectus. No
fixed interest rate allocations may be in effect as of the date that you
elect to participate in the benefit.
.. You cannot participate in any dollar cost averaging benefit that transfers
Account Value from a fixed interest rate option to a Sub-account.
.. Transfers from the other Sub-accounts to an AST bond portfolio Sub-account
or from an AST bond portfolio Sub-account to the other Sub-accounts under
the benefit will not count toward the maximum number of free transfers
allowable under the Annuity.
.. Any amounts applied to your Account Value by us on a maturity date will not
be treated as "investment in the contract" for income tax purposes.
.. As the time remaining until the applicable maturity date gradually
decreases, the benefit may become increasingly sensitive to moves to an AST
bond portfolio Sub-account.
.. We currently limit the Sub-accounts in which you may allocate Account Value
if you participate in this benefit. Moreover, if you are invested in
prohibited investment options and seek to acquire the benefit, we will ask
you to reallocate to permitted investment options as a prerequisite to
acquiring the benefit. Should we prohibit access to any investment option,
any transfers required to move Account Value to eligible investment options
will not be counted in determining the number of free transfers during an
Annuity Year.
CHARGES UNDER THE BENEFIT
We deduct an annual charge equal to 0. 60% (0.35%, for elections prior to
May 1, 2009) of the average daily net assets of the Sub-accounts (including
each AST bond portfolio Sub-account) for participation in the Highest Daily
GRO benefit. The charge is
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deducted daily. The charge is deducted to compensate us for: (a) the risk that
your Account Value on the maturity date is less than the amount guaranteed and
(b) administration of the benefit. We reserve the right to increase this fee
for newly-issued contracts or new elections of the benefit. The charges will
not exceed the maximum charges shown in the section of this prospectus
entitled "Summary of Contract Fees and Charges." You will begin paying this
charge as of the effective date of the benefit. We will not refund the charges
you have paid even if we never have to make any payments under the benefit.
OPTIONAL 90% CAP FEATURE FOR HIGHEST DAILY GRO
If you currently own an Annuity and have elected the Highest Daily GRO
benefit, you can elect this optional feature, at no additional cost, which
utilizes a new mathematical formula. The predetermined mathematical formula is
described below and will replace the "Transfer Calculation" portion of the
mathematical formula currently used in connection with your benefit on a
prospective basis. This election may only be made once and may not be revoked
once elected. The new formula is set forth in Appendix R of this prospectus,
and is described below. Only the election of the 90% cap feature will prevent
all of your Account Value from being allocated to an AST bond portfolio
Sub-account. If all of your Account Value is currently allocated to an AST
bond portfolio Sub-account, it will not transfer back to the Permitted
Sub-accounts unless you elect this 90% cap feature. If you make additional
Purchase Payments, they may result in a transfer of Account Value.
As with the formula that does not include the 90% cap feature, the formula
with the 90% cap feature determines whether a transfer occurs based, among
other things, on an identification of the outstanding guarantee that has the
largest present value. In identifying those guarantees, we consider each
guarantee that already has been set (i.e., on a benefit anniversary), as well
as the "Projected Future Guarantee" (as described above).
Although we employ several AST bond portfolio Sub-accounts for purposes of the
benefit, the formula described in the next paragraph operates so that your
Account Value may be allocated to only one AST bond portfolio Sub-account at
one time. In the description of the formula in the next paragraph, we refer to
the AST bond portfolio Sub-account in which you are invested immediately prior
to any potential asset transfer as the "Current AST bond portfolio
Sub-account." The formula may dictate that a transfer out of the Current AST
bond portfolio Sub-account be made, or alternatively may mandate a transfer
into an AST bond portfolio Sub-account. Any transfer into an AST bond
portfolio Sub-account will be directed to the AST bond portfolio Sub-account
associated with the "current liability" (we refer to that Sub-account as the
"Transfer AST bond portfolio Sub-account"). Note that if the Current AST bond
portfolio Sub-account is associated with the current liability, then that
Sub-account would be the Transfer AST bond portfolio Sub-account, and we would
simply transfer additional assets into the Sub-account if dictated by the
formula.
Under the new formula, the formula will not execute a transfer to the Transfer
AST bond portfolio Sub-account that results in more than 90% of your Account
Value being allocated to the Transfer AST bond portfolio Sub-account ("90% cap
rule"). Thus, on any Valuation Day, if the formula would require a transfer to
the Transfer AST bond portfolio Sub-account that would result in more than 90%
of the Account Value being allocated to the Transfer AST bond portfolio
Sub-account, only the amount that results in exactly 90% of the Account Value
being allocated to the Transfer AST bond portfolio Sub-account will be
transferred. Additionally, future transfers into the Transfer AST bond
portfolio Sub-account will not be made (regardless of the performance of the
Transfer AST bond portfolio Sub-account and the Permitted Sub-accounts) at
least until there is first a formula-initiated transfer out of the Transfer
AST bond portfolio Sub-account. Once this transfer occurs out of the Transfer
AST bond portfolio Sub-account, future amounts may be transferred to or from
the Transfer AST bond portfolio Sub-account if dictated by the formula
(subject to the 90% cap rule). At no time will the formula make a transfer to
the Transfer AST bond portfolio Sub-account that results in greater than 90%
of your Account Value being allocated to the Transfer AST bond portfolio
Sub-account. However, it is possible that, due to the investment performance
of your allocations in the Transfer AST bond portfolio Sub-account and your
allocations in the Permitted Sub-accounts you have selected, your Account
Value could be more than 90% invested in the Transfer AST bond portfolio
Sub-account.
If you make additional purchase payments to your Annuity while the transfer
restriction of the 90% cap rule is in effect, the formula will not transfer
any of such additional purchase payments to the Transfer AST bond portfolio
Sub-account at least until there is first a transfer out of the Transfer AST
bond portfolio Sub-account, regardless of how much of your Account Value is in
the Permitted Sub-accounts. This means that there could be scenarios under
which, because of the additional purchase payments you make, less than 90% of
your entire Account Value is allocated to the Transfer AST bond portfolio
Sub-account, and the formula will still not transfer any of your Account Value
to the Transfer AST bond portfolio Sub-account (at least until there is first
a transfer out of the Transfer AST bond portfolio Sub-account).
For example,
.. March 19, 2010 - a transfer is made that results in the 90% cap rule being
met and now $90,000 is allocated to the Transfer AST bond portfolio
Sub-account and $10,000 is allocated to the Permitted Sub-accounts.
.. March 20, 2010 - you make an additional purchase payment of $10,000. No
transfers have been made from the Transfer AST bond portfolio Sub-account
to the Permitted Sub-accounts since the cap went into effect on March 19,
2010.
.. As of March 20, 2010 (and at least until first a transfer is made out of
the Transfer AST bond portfolio Sub-account under the formula) the $10,000
payment is allocated to the Permitted Sub-accounts and now you have 82% in
the Transfer AST bond portfolio Sub-account and 18% in the Permitted
Sub-accounts (such that $20,000 is allocated to the Permitted Sub-accounts
and $90,000 is allocated to the Transfer AST bond portfolio Sub-account).
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.. Once there is a transfer out of the Transfer AST bond portfolio Sub-account
(of any amount), the formula will operate as described above, meaning that
the formula could transfer amounts to or from the Transfer AST bond
portfolio Sub-account if dictated by the formula (subject to the 90% cap
rule).
If at the time you elect the 90% cap rule, more than 90% of your Account Value
is allocated to an AST bond portfolio Sub-account used with the benefit, a
transfer will be made from the AST bond portfolio Sub-account such that
Account Value will be allocated 90% to the AST bond portfolio Sub-account and
10% will be allocated to your elected Sub-accounts. Amounts to be transferred
from the AST bond portfolio Sub-account to your elected Sub-accounts will be
transferred according to the following "hierarchy" (i.e., if a given item is
inapplicable, we use the next instruction that is applicable): (a) the
percentages dictated by any existing asset allocation program; or (b) the
percentages dictated by any auto-rebalancing program; or (c) pro-rata
according to amounts currently held in your elected Sub-accounts; or
(d) according to the currently-effective allocation instructions used for the
allocation of subsequent Purchase Payments. It is possible that additional
transfers might occur after this initial transfer if dictated by the formula.
The amount of such additional transfer(s) will vary. If, on the date this
feature is elected, 100% of your Account Value is allocated to the Transfer
AST bond portfolio Sub-account, a transfer of an amount equal to 10% of your
Account Value will be made to your Permitted Sub-accounts.
It is possible that an additional transfer to the Permitted Sub-accounts could
occur the following Valuation Day(s), and in some instances (based upon the
formula) the additional transfer(s) could be large. Thereafter, your Account
Value can be transferred between the Transfer AST bond portfolio Sub-account
and your Permitted Sub-accounts as frequently as daily, based on what the
formula prescribes.
Once the transfer restriction of the 90% cap feature is triggered, future
transfers into the Transfer AST bond portfolio Sub-account will not be made
(regardless of the performance of the Transfer AST bond portfolio Sub-account
and the Permitted Sub-accounts) at least until there is first a transfer out
of the Transfer AST bond portfolio Sub-account. Once this transfer occurs out
of the Transfer AST bond portfolio Sub-account, future amounts may be
transferred to or from the Transfer AST bond portfolio Sub-account if dictated
by the formula (subject to the 90% cap rule).
IMPORTANT CONSIDERATIONS WHEN ELECTING THIS FEATURE:
.. At any given time, some, most or none of your Account Value may be
allocated to the Transfer AST bond portfolio Sub-account.
.. Please be aware that because of the way the 90% cap feature mathematical
formula operates, it is possible that more than or less than 90% of your
Account Value may be allocated to the Transfer AST bond portfolio
Sub-account.
.. If this feature is elected, any Account Value transferred to the Permitted
Sub-accounts is subject to the investment performance of those
Sub-accounts. Your Account Value can go up or down depending on the
performance of the Permitted Sub-accounts you select.
Your election of the 90% cap feature will not result in your losing the
guarantees you had accumulated under your existing Highest Daily GRO benefit.
HIGHEST DAILY GUARANTEED RETURN OPTION II (HD GRO II)
You can elect this benefit on the Issue Date of your Annuity, or at any time
thereafter if available. In addition, you may cancel HD GRO II and then
re-elect the benefit beginning on the next Valuation Day if available,
provided that your Account Value is allocated as required by the benefit and
that you otherwise meet our eligibility rules. If you cancel the benefit, you
lose all guarantees that you had accumulated under the benefit. The initial
guarantee under the newly-elected benefit will be based on your current
Account Value at the time the new benefit becomes effective on your Annuity.
HD GRO II is not available if you participate in any other living benefit.
However, HD GRO II may be elected together with any optional death benefit,
other than the Highest Daily Value Death Benefit or the Plus40 Optional Life
Insurance Rider. As detailed below under "Key Feature - Allocation of Account
Value", your participation in this benefit among other things entails your
participation in a program that, as dictated by a predetermined mathematical
formula, may transfer your Account Value between your elected Sub-accounts and
an AST bond portfolio Sub-account.
HD GRO II creates a series of separate guarantees, each of which is based on
the highest Account Value attained on a day during the applicable time period.
As each year of your participation in the benefit passes, we create a new
guarantee. Each guarantee then remains in existence until the date on which it
matures (unless the benefit terminates sooner). We refer to each date on which
the specified Account Value is guaranteed as the "maturity date" for that
guarantee. HD GRO II will not create a guarantee if the maturity date of that
guarantee would extend beyond the date by which annuity payments must commence
under the terms of your Annuity. This is true even with respect to a new Owner
who has acquired the Annuity from the original Owner.
The guarantees provided by the benefit exist only on the applicable maturity
date(s). However, due to the ongoing monitoring of your Account Value, and the
transfer of Account Value to support our future guarantees, the benefit may
provide some protection from significant Sub-account losses. For this same
reason, the benefit may limit your ability to benefit from Sub-account
increases while it is in effect.
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The initial guarantee is created on the day that the HD GRO II benefit is
added to your Annuity. We guarantee that your Account Value on the tenth
anniversary of that day (we refer to each such anniversary as a "benefit
anniversary") will not be less than your Account Value on the day that the HD
GRO II benefit was added or re-added to your Annuity. Each benefit anniversary
thereafter, we create a new guarantee. With respect to each such subsequent
guarantee, we identify the highest Account Value that occurred between the
date of that benefit anniversary and the date on which HD GRO II was added to
your Annuity. We guarantee that your Account Value ten years after that
benefit anniversary will be no less than the highest daily Account Value that
occurred during that time period. The following example illustrates the time
period over which we identify the highest daily Account Value for purposes of
each subsequent guarantee under the benefit. If the date of benefit election
were January 1, 2010, we would create a guarantee on January 1, 2014 based on
the highest Account Value achieved between January 1, 2010 and January 1,
2014, and that guarantee would mature on January 1, 2024. As described below,
we adjust each of the guarantee amounts for purchase payments and withdrawals.
If the Account Value on the maturity date is less than the guaranteed amount,
we will contribute funds from our general account to bring your Account Value
up to the guaranteed amount. If the maturity date is not a Valuation Day, then
we would contribute such an amount on the next Valuation Day. We will allocate
any such amount to each Sub-account (other than the AST bond portfolio
Sub-account used with this benefit and described below) in accordance with
your most recent allocations instructions. Regardless of whether we need to
contribute funds at the end of a guarantee period, we will at that time
transfer all amounts held within the AST bond portfolio Sub-account associated
with the maturing guarantee to your other Sub-accounts on a pro rata basis,
unless your Account Value is being allocated according to an asset allocation
program, in such case your Account Value will be transferred according to the
program.
We increase the amount of each guarantee that has not yet reached its maturity
date, as well as the highest daily Account Value that we calculate to
establish a guarantee, by the amount of each Purchase Payment made prior to
the applicable maturity date. For example, if the effective date of the
benefit was January 1, 2010, and there was an initial guaranteed amount that
was set at $100,000 maturing January 1, 2020, and a second guaranteed amount
that was set at $120,000 maturing January 1, 2021, then a $30,000 Purchase
Payment made on March 30, 2011 would increase the guaranteed amounts to
$130,000 and $150,000, respectively.
If you make a withdrawal, we effect a proportional reduction to each existing
guarantee amount. We calculate a proportional reduction by reducing each
existing guarantee amount by the percentage represented by the ratio of the
withdrawal amount to your Account Value immediately prior to the withdrawal.
If you make a withdrawal, we will deduct the withdrawal amount pro rata from
each of your Sub-accounts (including the AST bond portfolio Sub-account used
with this benefit).
Any partial withdrawal for payment of any third party investment advisory
service will be treated as a withdrawal, and will reduce each guarantee amount
proportionally, in the manner indicated above.
EXAMPLE
This example is purely hypothetical and does not reflect the charges for the
benefit or any other fees and charges under the Annuity. It is intended to
illustrate the proportional reduction of a withdrawal on each guarantee amount
under this benefit.
Assume the following:
.. The Issue Date is December 1, 2010
.. The benefit is elected on December 1, 2010
.. The Account Value on December 1, 2010 is $200,000, which results in an
initial guarantee of $200,000
.. An additional guarantee amount of $300,000 is locked in on December 1, 2011
.. The Account Value immediately prior to the withdrawal is equal to $300,000
If a withdrawal of $50,000 is taken on December 15, 2011, all guarantee
amounts will be reduced by the ratio the total withdrawal amount represents of
the Account Value just prior to the withdrawal being taken.
HERE IS THE CALCULATION (FIGURES ARE ROUNDED):
Withdrawal Amount $ 50,000
Divided by Account Value before withdrawal $300,000
Equals ratio 16.67%
All guarantees will be reduced by the above ratio (16.67%)
Initial guarantee amount $166,667
Additional guarantee amount $250,000
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KEY FEATURE - ALLOCATION OF ACCOUNT VALUE
We limit the Sub-accounts to which you may allocate Account Value if you elect
HD GRO II. For purposes of this benefit, we refer to those permitted
investment options (other than the AST bond portfolio used with this benefit)
as the "Permitted Sub-accounts".
HD GRO II uses a predetermined mathematical formula to help manage your
guarantees through all market cycles. The formula applicable to you may not be
altered once you elect the benefit. However, subject to regulatory approval,
we do reserve the right to amend the formula for existing Annuities that elect
the benefit post-issue. This required formula helps us manage our financial
exposure under HD GRO II, by moving assets out of certain Sub-accounts if
dictated by the formula (see below). In essence, we seek to preserve Account
Value, by transferring it to a more stable option (i.e., one or more specified
bond portfolios of Advanced Series Trust). We refer to the Sub-accounts
corresponding to these bond portfolios collectively as the "AST bond portfolio
Sub-accounts". The formula also contemplates the transfer of Account Value
from an AST bond portfolio Sub-account to the other Sub-accounts. The formula
is set forth in Appendix S of this prospectus. A summary description of each
AST bond portfolio Sub-account appears within the prospectus section entitled
"Investment Options". In addition, you can find a copy of the AST bond
portfolio prospectus by going to www.prudentialannuities.com.
For purposes of operating the HD GRO II formula, we have included within each
Annuity several AST bond portfolio Sub-accounts. Each AST bond portfolio is
unique, in that its underlying investments generally mature at different
times. For example, there would be an AST bond portfolio whose underlying
investments generally mature in 2020, an AST bond portfolio whose underlying
investments generally mature in 2021, and so forth. As discussed below, the
formula determines the appropriate AST bond portfolio Sub-account to which
Account Value is transferred. We will introduce new AST bond portfolio
Sub-accounts in subsequent years, to correspond generally to the length of new
guarantee periods that are created under this benefit. If you have elected HD
GRO II, you may have Account Value allocated to an AST bond portfolio
Sub-account only by operation of the formula, and thus you may not allocate
Purchase Payments to or make transfers to or from an AST bond portfolio
Sub-account.
Although we employ several AST bond portfolio Sub-accounts for purposes of the
benefit, the formula described in the next paragraph operates so that your
Account Value may be allocated to only one AST bond portfolio Sub-account at
one time. The formula determines the appropriate AST bond portfolio
Sub-account to which Account Value is transferred. On any day a transfer into
or out of the AST bond portfolio Sub-account is made the formula may dictate
that a transfer out of one AST bond portfolio Sub-account be made into another
AST bond portfolio Sub-account. Any transfer into an AST bond portfolio
Sub-account will be directed to the AST bond portfolio Sub-account associated
with the "current liability", as described below. As indicated, the formula
and AST bond portfolio Sub-accounts are employed with this benefit to help us
mitigate the financial risks under our guarantee. Thus, the applicable formula
under the benefit determines which AST bond portfolio Sub-account your Account
Value is transferred to, and under what circumstances a transfer is made.
In general, the formula works as follows. Under the formula, Account Value
transfers between the "Permitted Sub-accounts" and an AST bond portfolio
Sub-account when dictated. On each Valuation Day, including the effective date
of the benefit, the pre-determined mathematical formula is used to compare
your Account Value to an amount based on the guarantees provided under the
benefit. The formula determines whether a transfer occurs based, among other
things, on an identification of the outstanding guarantee that has the largest
present value. Based on the formula, a determination is made as to whether any
portion of your Account Value is to be transferred to or from the AST bond
portfolio Sub-account. In identifying those guarantees, we consider each
guarantee that already has been set (i.e., on a benefit anniversary), as well
as an amount that we refer to as the "Projected Future Guarantee." The
"Projected Future Guarantee" is an amount equal to the highest Account Value
(adjusted for withdrawals and additional Purchase Payments as described in the
section of the prospectus concerning HD GRO II) within the current benefit
year that would result in a new guarantee. For the Projected Future Guarantee,
the assumed guarantee period begins on the current Valuation Day and ends 10
years from the next anniversary of the effective date of the benefit. As such,
a Projected Future Guarantee could cause a transfer of Account Value into an
AST bond portfolio Sub-account. We only calculate a Projected Future Guarantee
if the assumed guarantee period associated with that Projected Future
Guarantee does not extend beyond the latest Annuity Date applicable to the
Annuity. The amount that is transferred to and from the AST bond portfolio
Sub-accounts pursuant to the formula depends upon the factors set forth in the
seven bullet points below, some of which relate to the guarantee amount(s),
including the Projected Future Guarantee.
For each outstanding guarantee and the Projected Future Guarantee, the formula
begins by determining the present value on that Valuation Day that, if
appreciated at the applicable "discount rate", would equal the applicable
guarantee amount on the Maturity Date. As detailed in the formula, the
discount rate is an interest rate determined by taking a benchmark index used
within the financial services industry and then reducing that interest rate by
a prescribed adjustment. Once selected, we do not change the applicable
benchmark index (although we do reserve the right to use a new benchmark index
if the original benchmark is discontinued). The greatest of each such present
value is referred to as the "current liability" in the formula. The formula
compares the current liability to the amount of your Account Value held within
the AST bond portfolio Sub-account and to your Account Value held within the
Permitted Sub-accounts. If the current liability, reduced by the amount held
within the AST bond portfolio Sub-account, and divided by the amount held
within the Permitted Sub-accounts, exceeds an upper target value (currently,
85%),
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then the formula will make a transfer into the AST bond portfolio Sub-account,
in the amount dictated by the formula (subject to the 90% cap feature
discussed below). If the current liability, reduced by the amount held within
the AST bond portfolio Sub-account, and divided by the amount within the
Permitted Sub-accounts, is less than a lower target value (currently, 79%),
then the formula will transfer Account Value from the AST bond portfolio
Sub-account into the Permitted Sub-accounts, in the amount dictated by the
formula.
The formula will not execute a transfer to the AST bond portfolio Sub-account
that results in more than 90% of your Account Value being allocated to the AST
bond portfolio Sub-account ("90% cap"). Thus, on any Valuation Day, if the
formula would require a transfer to the AST bond portfolio Sub-account that
would result in more than 90% of the Account Value being allocated to the AST
bond portfolio Sub-account, only the amount that results in exactly 90% of the
Account Value being allocated to the AST bond portfolio Sub-account will be
transferred. Additionally, future transfers into the AST bond portfolio
Sub-account will not be made (regardless of the performance of the AST bond
portfolio Sub-account and the Permitted Sub-accounts) at least until there is
first a transfer out of the AST bond portfolio Sub-account. Once this transfer
occurs out of the AST bond portfolio Sub-account, future amounts may be
transferred to or from the AST bond portfolio Sub-account if dictated by the
formula (subject to the 90% cap). At no time will the formula make a transfer
to the AST bond portfolio Sub-account that results in greater than 90% of your
Account Value being allocated to the AST bond portfolio Sub-account. However,
it is possible that, due to the investment performance of your allocations in
the AST bond portfolio Sub-account and your allocations in the Permitted
Sub-accounts you have selected, your Account Value could be more than 90%
invested in the AST bond portfolio Sub-account. If you make additional
Purchase Payments to your Annuity while the 90% cap is in effect, the formula
will not transfer any of such additional Purchase Payments to the AST bond
portfolio Sub-account at least until there is first a transfer out of the AST
bond portfolio Sub-account, regardless of how much of your Account Value is in
the Permitted Sub-accounts. This means that there could be scenarios under
which, because of the additional Purchase Payments you make, less than 90% of
your entire Account Value is allocated to the AST bond portfolio Sub-account,
and the formula will still not transfer any of your Account Value to the AST
bond portfolio Sub-account (at least until there is first a transfer out of
the AST bond portfolio Sub-account).
For example,
.. March 17, 2011 - a transfer is made to the AST bond portfolio Sub-account
that results in the 90% cap being met and now $90,000 is allocated to the
AST bond portfolio Sub-account and $10,000 is allocated to the Permitted
Sub-accounts.
.. March 18, 2011 - you make an additional Purchase Payment of $10,000. No
transfers have been made from the AST bond portfolio Sub-account to the
Permitted Sub-accounts since the cap went into effect on March 17, 2011.
.. On March 18, 2011 (and at least until first a transfer is made out of the
AST bond portfolio Sub-account under the formula) - the $10,000 payment is
allocated to the Permitted Sub-accounts and on this date you have 82% in
the AST bond portfolio Sub-account and 18% in the Permitted Sub-accounts
(such that $20,000 is allocated to the Permitted Sub-accounts and $90,000
to the AST bond portfolio Sub-account).
.. Once there is a transfer out of the AST bond portfolio Sub-account (of any
amount), the formula will operate as described above, meaning that the
formula could transfer amounts to or from the AST bond portfolio
Sub-account if dictated by the formula (subject to the 90% cap).
Under the operation of the formula, the 90% cap may come into and out of
effect multiple times while you participate in the benefit. We will continue
to monitor your Account Value daily and, if dictated by the formula,
systematically transfer amounts between the Permitted Sub-accounts you have
chosen and the AST bond portfolio Sub-account as dictated by the formula.
As discussed above, each Valuation Day, the formula analyzes the difference
between your Account Value and your guarantees as well as how long you have
owned the benefit, and determines if any portion of your Account Value needs
to be transferred into or out of the AST bond portfolio Sub-accounts.
Therefore, at any given time, some, none, or most of your Account Value may be
allocated to the AST bond portfolio Sub-accounts.
Each market cycle is unique, therefore the performance of your Sub-accounts,
and its impact on your Account Value, will differ from market cycle to market
cycle producing different transfer activity under the formula. The amount and
timing of transfers to and from the AST bond portfolio Sub-accounts pursuant
to the formula depend on various factors unique to your Annuity and are not
necessarily directly correlated with the securities markets, bond markets,
interest rates or any other market or index. Some of the factors that
determine the amount and timing of transfers (as applicable to your Annuity),
include:
.. The difference between your Account Value and your guarantee amount(s);
.. The amount of time until the maturity of your guarantee(s);
.. The amount invested in, and the performance of, the Permitted Sub-accounts;
.. The amount invested in, and the performance of, the AST bond portfolio
Sub-accounts;
.. The discount rate used to determine the present value of your guarantee(s);
.. Additional Purchase Payments, if any, that you make to the Annuity; and
.. Withdrawals, if any, taken from the Annuity.
Any amounts invested in the AST bond portfolio Sub-accounts will affect your
ability to participate in a subsequent market recovery within the Permitted
Sub-accounts. Conversely, the Account Value may be higher at the beginning of
the market recovery, e.g. more of the Account Value may have been protected
from decline and volatility than it otherwise would have been had the benefit
not been elected.
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The AST bond portfolio Sub-accounts are available only with certain optional
living benefits, and you may not allocate Purchase Payments to or transfer
Account Value to or from the AST bond portfolio Sub-accounts.
Transfers under the formula do not impact any guarantees under the benefit
that have already been locked-in.
SPECIAL CONSIDERATIONS UNDER HD GRO II
This benefit is subject to certain rules and restrictions, including, but not
limited to the following:
.. Upon inception of the benefit, 100% of your Account Value must be allocated
to the Permitted Sub-accounts. The Permitted Sub-accounts are those
described in the Investment Option section of the prospectus. No fixed
interest rate allocations may be in effect as of the date that you elect to
participate in the benefit.
.. Transfers to and from your elected Sub-accounts and an AST bond portfolio
Sub-account will not count toward the maximum number of free transfers
allowable under the Annuity.
.. Any amounts applied to your Account Value by us on a maturity date will not
be treated as "investment in the contract" for income tax purposes.
.. As the time remaining until the applicable maturity date gradually
decreases, the benefit may become increasingly sensitive to moves to an AST
bond portfolio Sub-account.
.. We currently limit the Sub-accounts to which you may allocate Account Value
if you participate in this benefit. Moreover, if you are invested in
prohibited investment options and seek to acquire the benefit, we will ask
you to reallocate to permitted investment options as a prerequisite to
acquiring the benefit. Should we prohibit access to any investment option,
any transfers required to move Account Value to eligible investment options
will not be counted in determining the number of free transfers during an
Annuity Year.
.. If you elect this benefit, and in connection with that election you are
required to reallocate to different investment options permitted under this
benefit, then on the Valuation Day on which we receive your request in Good
Order, we will (i) sell units of the non-permitted investment options and
(ii) invest the proceeds of those sales in the permitted investment options
that you have designated. During this reallocation process, your Account
Value allocated to the Sub-accounts will remain exposed to investment risk,
as is the case generally. The newly-elected benefit will commence at the
close of business on the following Valuation Day. The protection afforded
by the newly-elected benefit will not arise until the close of business on
the following Valuation Day.
CHARGES UNDER THE BENEFIT
We deduct an annualized charge equal to 0.60% of the average daily net assets
of the Sub-accounts (including any AST bond portfolio Sub-account) for
participation in the HD GRO II benefit. The annual charge is deducted daily.
The charge is deducted to compensate us for: (a) the risk that your Account
Value on the maturity date is less than the amount guaranteed and
(b) administration of the benefit. You will begin paying this charge as of the
effective date of the benefit. We will not refund the charges you have paid
even if we never have to make any payments under the benefit.
GUARANTEED MINIMUM WITHDRAWAL BENEFIT (GMWB)
The Guaranteed Minimum Withdrawal Benefit is no longer available for new
elections.
The Guaranteed Minimum Withdrawal Benefit guarantees your ability to withdraw
amounts equal to an initial principal value (called the "Protected Value"),
regardless of the impact of Sub-account performance on your Account Value,
subject to our benefit rules regarding the timing and amount of withdrawals.
The benefit may be appropriate if you intend to make periodic withdrawals from
your Annuity and wish to ensure that Sub-account performance will not affect
your ability to protect your principal. You are not required to make
withdrawals as part of the benefit - the guarantee is not lost if you withdraw
less than the maximum allowable amount of principal each year under the rules
of the benefit. There is an additional charge if you elected the GMWB benefit;
however, the charge may be waived under certain circumstances described below.
KEY FEATURE - PROTECTED VALUE
The Protected Value is the total amount that we guarantee will be available to
you through withdrawals from your Annuity and/or benefit payments, regardless
of the impact of Sub-account performance on your Account Value. The Protected
Value is reduced with each withdrawal you make until the Protected Value is
reduced to zero. When the Protected Value is reduced to zero due to your
withdrawals, the GMWB benefit terminates. Additionally, the Protected Value is
used to determine the maximum annual amount that you can withdraw from your
Annuity, called the Protected Annual Withdrawal Amount, without triggering an
adjustment in the Protected Value on a proportional basis. The Protected Value
is referred to as the "Benefit Base" in the rider we issue for this benefit.
The Protected Value is determined as of the date you make your first
withdrawal under your Annuity following your election of the GMWB benefit. The
initial Protected Value is equal to the greater of (A) the Account Value on
the date you elect the GMWB benefit, plus any additional Purchase Payments
before the date of your first withdrawal; or (B) the Account Value as of the
date of the first withdrawal from your Annuity. The Protected Value may be
enhanced by increases in your Account Value due to Sub-account performance
during the period between your election of the GMWB benefit and the date of
your first withdrawal.
.. If you elect the GMWB benefit at the time you purchase your Annuity, the
Account Value will be your initial Purchase Payment.
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.. If we offer the GMWB benefit to existing Annuity Owners, the Account Value
on the anniversary of the Issue Date of your Annuity following your
election of the GMWB benefit will be used to determine the initial
Protected Value.
.. If you make additional Purchase Payments after your first withdrawal, the
Protected Value will be increased by the amount of the additional Purchase
Payment.
You may elect to step-up your Protected Value if, due to positive Sub-account
performance, your Account Value is greater than the Protected Value. You are
eligible to step-up the Protected Value on or after the 5/th/ anniversary
following the first withdrawal under the GMWB benefit. The Protected Value can
be stepped up again on or after the 5/th/ anniversary following the preceding
step-up. If you elect to step-up the Protected Value, you must do so during
the 30-day period prior to your eligibility date. If you elect to step-up the
Protected Value under the benefit, and on the date you elect to step-up, the
charges under the GMWB benefit have changed for new purchasers, your benefit
may be subject to the new charge going forward.
Upon election of the step-up, we reset the Protected Value to be equal to the
then current Account Value. For example, assume your initial Protected Value
was $100,000 and you have made cumulative withdrawals of $40,000, reducing the
Protected Value to $60,000. On the date you are eligible to step-up the
Protected Value, your Account Value is equal to $75,000. You could elect to
step-up the Protected Value to $75,000 on the date you are eligible. Upon
election of the step-up, we also reset the Protected Annual Withdrawal Amount
(discussed immediately below) to be equal to the greater of (A) the Protected
Annual Withdrawal Amount immediately prior to the reset; and (B) 7% of the
Protected Value immediately after the reset.
KEY FEATURE - PROTECTED ANNUAL WITHDRAWAL AMOUNT.
The initial Protected Annual Withdrawal Amount is equal to 7% of the Protected
Value. Under the GMWB benefit, if your cumulative withdrawals each Annuity
Year are less than or equal to the Protected Annual Withdrawal Amount, your
Protected Value will be reduced on a "dollar-for-dollar" basis (the Protected
Value is reduced by the actual amount of the withdrawal, including any MVA
that may apply). Cumulative withdrawals in any Annuity Year that exceed the
Protected Annual Withdrawal Amount trigger a proportional adjustment to both
the Protected Value and the Protected Annual Withdrawal Amount, as described
in the rider for this benefit (see the examples of this calculation below).
The Protected Annual Withdrawal Amount is referred to as the "Maximum Annual
Benefit" in the rider we issue for this benefit.
THE GMWB BENEFIT DOES NOT AFFECT YOUR ABILITY TO MAKE WITHDRAWALS UNDER YOUR
ANNUITY OR LIMIT YOUR ABILITY TO REQUEST WITHDRAWALS THAT EXCEED THE PROTECTED
ANNUAL WITHDRAWAL AMOUNT. You are not required to withdraw all or any portion
of the Protected Annual Withdrawal Amount each Annuity Year.
.. If, cumulatively, you withdraw an amount less than the Protected Annual
Withdrawal Amount in any Annuity Year, you cannot carry-over the unused
portion of the Protected Annual Withdrawal Amount to subsequent Annuity
Years. However, because the Protected Value is only reduced by the actual
amount of withdrawals you make under these circumstances, any unused
Protected Annual Withdrawal Amount may extend the period of time until the
remaining Protected Value is reduced to zero.
.. Additional Purchase Payments will increase the Protected Annual Withdrawal
Amount by 7% of the applicable Purchase Payment.
.. If the Protected Annual Withdrawal Amount after an adjustment exceeds the
Protected Value, the Protected Annual Withdrawal Amount will be set equal
to the Protected Value.
The following examples of dollar-for dollar and proportional reductions and
the reset of the Maximum Annual Benefit assume that: 1.) the Issue Date and
the effective date of the GMWB benefit are October 13, 2005; 2.) an initial
Purchase Payment of $250,000; 3.) a Protected Value of $250,000; and 4.) a
Protected Annual Withdrawal Amount of $17,500 (7% of $250,000). The values set
forth here are purely hypothetical and do not reflect the charge for GMWB or
any other fees and charges.
EXAMPLE 1. DOLLAR-FOR-DOLLAR REDUCTION
A $10,000 withdrawal is taken on November 13, 2005 (in the first Annuity
Year). No prior withdrawals have been taken. As the amount withdrawn is less
than the Protected Annual Withdrawal Amount:
.. The Protected Value is reduced by the amount withdrawn (i.e., by $10,000,
from $250,000 to $240,000).
.. The remaining Protected Annual Withdrawal Amount for the balance of the
first Annuity Year is also reduced by the amount withdrawn (from $17,500 to
$7,500).
EXAMPLE 2. DOLLAR-FOR-DOLLAR AND PROPORTIONAL REDUCTIONS
A second $10,000 withdrawal is taken on December 13, 2005 (still within the
first Annuity Year). The Account Value immediately before the withdrawal is
$220,000. As the amount withdrawn exceeds the remaining Protected Annual
Withdrawal Amount of $7,500 from Example 1:
.. the Protected Value is first reduced by the remaining Protected Annual
Withdrawal Amount (from $240,000 to $232,500);
.. The result is then further reduced by the ratio of A to B, where:
-- A is the amount withdrawn less the remaining Protected Annual Withdrawal
Amount ($10,000 - $7,500, or $2,500).
-- B is the Account Value less the remaining Protected Annual Withdrawal
Amount ($220,000 - $7,500, or $212,500).
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The resulting Protected Value is: $232,500 X (1 - $2,500 / $212,500), or
$229,764.71.
.. the Protected Annual Withdrawal Amount is also reduced by the ratio of A to
B: The resulting Protected Annual Withdrawal Amount is: $17,500 X (1 -
$2,500 / $212,500), or $17,294.12.
-- The remaining Protected Annual Withdrawal Amount is set to zero (0) for
the balance of the first Annuity Year.
EXAMPLE 3. RESET OF THE MAXIMUM ANNUAL BENEFIT
A $10,000 withdrawal is made on October 13, 2006 (second Annuity Year). The
remaining Protected Annual Withdrawal Amount has been reset to the Protected
Annual Withdrawal Amount of $17,294.12 from Example 2. As the amount withdrawn
is less than the remaining Protected Annual Withdrawal Amount:
.. the Protected Value is reduced by the amount withdrawn (i.e., reduced by
$10,000, from $229,764.71 to $219,764.71).
.. the remaining Protected Annual Withdrawal Amount for the balance of the
second Annuity Year is also reduced by the amount withdrawn (from
$17,294.12 to $7,294.12).
BENEFITS UNDER GMWB
.. In addition to any withdrawals you make under the GMWB benefit, Sub-account
performance may reduce your Account Value. If your Account Value is equal
to zero, and you have not received all of your Protected Value in the form
of withdrawals from your Annuity, we will continue to make payments equal
to the remaining Protected Value in the form of fixed, periodic payments
until the remainder of the Protected Value is paid, at which time the rider
terminates. The fixed, periodic payments will each be equal to the
Protected Annual Withdrawal Amount, except for the last payment which may
be equal to the remaining Protected Value. We will determine the duration
for which periodic payments will continue by dividing the Protected Value
by the Protected Annual Withdrawal Amount. You will not have the right to
make additional Purchase Payments or receive the remaining Protected Value
in a lump sum. You can elect the frequency of payments, subject to our
rules then in effect.
.. If the death benefit under your Annuity becomes payable before you have
received all of your Protected Value in the form of withdrawals from your
Annuity, your Beneficiary has the option to elect to receive the remaining
Protected Value as an alternate death benefit payout in lieu of the amount
payable under any other death benefit provided under your Annuity. The
remaining Protected Value will be payable in the form of fixed, periodic
payments. Your beneficiary can elect the frequency of payments, subject to
our rules then in effect. We will determine the duration for which periodic
payments will continue by dividing the Protected Value by the Protected
Annual Withdrawal Amount. THE PROTECTED VALUE IS NOT EQUAL TO THE ACCOUNT
VALUE FOR PURPOSES OF THE ANNUITY'S OTHER DEATH BENEFIT OPTIONS. THE GMWB
BENEFIT DOES NOT INCREASE OR DECREASE THE AMOUNT OTHERWISE PAYABLE UNDER
THE ANNUITY'S OTHER DEATH BENEFIT OPTIONS. GENERALLY, THE GMWB BENEFIT
WOULD BE OF VALUE TO YOUR BENEFICIARY ONLY WHEN THE PROTECTED VALUE AT
DEATH EXCEEDS ANY OTHER AMOUNT AVAILABLE AS A DEATH BENEFIT.
.. If you elect to begin receiving annuity payments before you have received
all of your Protected Value in the form of withdrawals from your Annuity,
an additional annuity payment option will be available that makes fixed
annuity payments for a certain period, determined by dividing the Protected
Value by the Protected Annual Withdrawal Amount. If you elect to receive
annuity payments calculated in this manner, the assumed interest rate used
to calculate such payments will be 0%, which is less than the assumed
interest rate on other annuity payment options we offer. This 0% assumed
interest rate results in lower annuity payments than what would have been
paid if the assumed interest rate was higher than 0%. YOU CAN ALSO ELECT TO
TERMINATE THE GMWB BENEFIT AND BEGIN RECEIVING ANNUITY PAYMENTS BASED ON
YOUR THEN CURRENT ACCOUNT VALUE (NOT THE REMAINING PROTECTED VALUE) UNDER
ANY OF THE AVAILABLE ANNUITY PAYMENT OPTIONS.
OTHER IMPORTANT CONSIDERATIONS
.. Withdrawals under the GMWB benefit are subject to all of the terms and
conditions of your Annuity, including any MVA that may apply.
.. Withdrawals made while the GMWB benefit is in effect will be treated, for
tax purposes, in the same way as any other withdrawals under your Annuity.
.. The GMWB benefit does not directly affect your Annuity's Account Value or
Surrender Value, but any withdrawal will decrease the Account Value by the
amount of the withdrawal. If you surrender your Annuity, you will receive
the current Surrender Value, not the Protected Value.
.. You can make withdrawals from your Annuity while your Account Value is
greater than zero without purchasing the GMWB benefit. The GMWB benefit
provides a guarantee that if your Account Value declines due to Sub-account
performance, you will be able to receive your Protected Value in the form
of periodic benefit payments.
.. We currently limit the Sub-accounts in which you may allocate Account Value
if you participate in this benefit. Should we prohibit access to any
investment option, any transfers required to move Account Value to eligible
investment options will not be counted in determining the number of free
transfers during an Annuity Year.
.. The Basic Death Benefit will terminate if withdrawals taken under the GMWB
benefit cause your Account Value to reduce to zero. Certain optional Death
Benefits may terminate if withdrawals taken under the GMWB benefit cause
your Account Value to reduce to zero. (See "Death Benefit" for more
information.)
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ELECTION OF THE BENEFIT
The GMWB benefit is no longer available. If you currently participate in GMWB,
your existing guarantees are unaffected by the fact that we no longer offer
GMWB.
We reserve the right to restrict the maximum amount of Protected Value that
may be covered under the GMWB benefit under this Annuity or any other
annuities that you own that are issued by Prudential Annuities or its
affiliated companies.
TERMINATION OF THE BENEFIT
The benefit terminates automatically when your Protected Value reaches zero
based on your withdrawals. You may terminate the benefit at any time by
notifying us. If you terminate the benefit, any guarantee provided by the
benefit will terminate as of the date the termination is effective. The
benefit terminates upon your surrender of your Annuity, upon due proof of
death (unless your surviving spouse elects to continue your Annuity and the
GMWB benefit or your Beneficiary elects to receive the amounts payable under
the GMWB benefit in lieu of the death benefit) or upon your election to begin
receiving annuity payments.
The charge for the GMWB benefit will no longer be deducted from your Account
Value upon termination of the benefit.
PLEASE NOTE THAT IF YOU TERMINATE A LIVING BENEFIT SUCH AS GMWB AND ELECT A
NEW LIVING BENEFIT, YOU LOSE THE GUARANTEES THAT YOU HAD ACCUMULATED UNDER
YOUR EXISTING BENEFIT AND WE WILL BASE ANY GUARANTEES UNDER THE NEW BENEFIT ON
YOUR ACCOUNT VALUE AS OF THE DATE THE NEW BENEFIT BECOMES ACTIVE. WE RESERVE
THE RIGHT TO WAIVE, CHANGE AND/OR FURTHER LIMIT THE ELECTION FREQUENCY IN THE
FUTURE.
CHARGES UNDER THE BENEFIT
.. Currently, we deduct a charge equal to 0.35% of the average daily net
assets of the Sub-accounts per year for the GMWB benefit. The annual charge
is deducted daily.
.. If, during the seven years following the effective date of the benefit, you
do not make any withdrawals, and also during the five years after the
effective date of the benefit you make no purchase payment, we will
thereafter waive the charge for GMWB. If you make a purchase payment after
we have instituted that fee waiver (whether that purchase payment is
directed to a Sub-account or to a Fixed Allocation), we will resume
imposing the GMWB fee (without notifying you of the resumption of the
charge). Withdrawals that you take after the fee waiver has been instituted
will not result in the re-imposition of the GMWB charge.
.. If you elect to step-up the Protected Value under the benefit, and on the
date you elect to step-up, the charges under the benefit have changed for
new purchasers, your benefit may be subject to the new charge level for the
benefit.
ADDITIONAL TAX CONSIDERATIONS FOR QUALIFIED CONTRACTS/ARRANGEMENTS
If you purchase an Annuity as an investment vehicle for "qualified"
investments, including an IRA, SEP-IRA, Tax Sheltered Annuity (or 403(b)) or
employer plan under Code Section 401(a), the required minimum distribution
rules under the Code provide that you begin receiving periodic amounts from
your Annuity beginning after age 70 1/2. For a Tax Sheltered Annuity or a
401(a) plan for which the participant is not a greater than 5 percent owner of
the employer, this required beginning date can generally be deferred to
retirement, if later. Roth IRAs are not subject to these rules during the
owner's lifetime. The amount required under the Code may exceed the Protected
Annual Withdrawal Amount, which will cause us to recalculate the Protected
Value and the Protected Annual Withdrawal Amount, resulting in a lower amount
payable in future Annuity Years. In addition, the amount and duration of
payments under the annuity payment and death benefit provisions may be
adjusted so that the payments do not trigger any penalty or excise taxes due
to tax considerations such as required minimum distribution provisions under
the tax law.
GUARANTEED MINIMUM INCOME BENEFIT (GMIB)
The Guaranteed Minimum Income Benefit is no longer available for new elections.
The Guaranteed Minimum Income Benefit is an optional benefit that, after a
seven-year waiting period, guarantees your ability to begin receiving income
from your Annuity in the form of annuity payments based on a guaranteed
minimum value (called the "Protected Income Value") that increases after the
waiting period begins, regardless of the impact of Sub-account performance on
your Account Value. The benefit may be appropriate for you if you anticipate
using your Annuity as a future source of periodic fixed income payments for
the remainder of your life and wish to ensure that the basis upon which your
income payments will be calculated will achieve at least a minimum amount
despite fluctuations in market performance. There is an additional charge if
you elected the GMIB benefit.
KEY FEATURE - PROTECTED INCOME VALUE
The Protected Income Value is the minimum amount that we guarantee will be
available (net of any applicable tax charge), after a waiting period of at
least seven years, as a basis to begin receiving fixed annuity payments. The
Protected Income Value is initially established on the effective date of the
GMIB benefit and is equal to your Account Value on such date. Currently, since
the GMIB benefit may only be elected at issue, the effective date is the Issue
Date of your Annuity. The Protected Income Value is increased daily based on
an annual growth rate of 5%, subject to the limitations described below. The
Protected Income Value is referred to as the "Protected Value" in the rider we
issue for this benefit. The 5% annual growth rate is referred to as the
"Roll-Up Percentage" in the rider we issue for this benefit.
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The Protected Income Value is subject to a limit of 200% (2X) of the sum of
the Protected Income Value established on the effective date of the GMIB
benefit, or the effective date of any step-up value, plus any additional
Purchase Payments made after the waiting period begins ("Maximum Protected
Income Value"), minus the impact of any withdrawals (as described below in
"Impact of Withdrawals on the Protected Income Value") you make from your
Annuity after the waiting period begins.
.. Subject to the maximum age/durational limits described immediately below,
we will no longer increase the Protected Income Value by the 5% annual
growth rate once you reach the Maximum Protected Income Value. However, we
will increase the Protected Income Value by the amount of any additional
Purchase Payments after you reach the Maximum Protected Income Value.
Further, if you make withdrawals after you reach the Maximum Protected
Income Value, we will reduce the Protected Income Value and the Maximum
Protected Income Value by the proportional impact of the withdrawal on your
Account Value.
.. Subject to the Maximum Protected Income Value, we will no longer increase
the Protected Income Value by the 5% annual growth rate after the later of
the anniversary date on or immediately following the Annuitant's 80/th/
birthday or the 7/th/ anniversary of the later of the effective date of the
GMIB benefit or the effective date of the most recent step-up. However, we
will increase the Protected Income Value by the amount of any additional
Purchase Payments. Further, if you make withdrawals after the Annuitant
reaches the maximum age/duration limits, we will reduce the Protected
Income Value and the Maximum Protected Income Value by the proportional
impact of the withdrawal on your Account Value.
.. Subject to the Maximum Protected Income Value, if you make an additional
Purchase Payment, we will increase the Protected Income Value by the amount
of the Purchase Payment and will apply the 5% annual growth rate on the new
amount from the date the Purchase Payment is applied.
.. As described below, after the waiting period begins, cumulative withdrawals
each Annuity Year that are up to 5% of the Protected Income Value on the
prior anniversary of your Annuity will reduce the Protected Income Value by
the amount of the withdrawal. Cumulative withdrawals each Annuity Year in
excess of 5% of the Protected Income Value on the prior anniversary of your
Annuity will reduce the Protected Income Value proportionately. All
withdrawals after the Maximum Protected Income Value is reached will reduce
the Protected Income Value proportionately. The 5% annual growth rate will
be applied to the reduced Protected Income Value from the date of the
withdrawal.
STEPPING-UP THE PROTECTED INCOME VALUE - You may elect to "step-up" or "reset"
your Protected Income Value if your Account Value is greater than the current
Protected Income Value. Upon exercise of the step-up provision, your initial
Protected Income Value will be reset equal to your current Account Value. From
the date that you elect to step-up the Protected Income Value, we will apply
the 5% annual growth rate to the stepped-up Protected Income Value, as
described above. You can exercise the step-up provision twice while the GMIB
benefit is in effect, and only while the Annuitant is less than age 76.
.. A new seven-year waiting period will be established upon the effective date
of your election to step-up the Protected Income Value. You cannot exercise
your right to begin receiving annuity payments under the GMIB benefit until
the end of the new waiting period. In light of this waiting period upon
resets, it is not recommended that you reset your GMIB if the required
beginning date under IRS minimum distribution requirements would commence
during the 7 year waiting period. See "Tax Considerations" section in this
prospectus for additional information on IRS requirements.
.. The Maximum Protected Income Value will be reset as of the effective date
of any step-up. The new Maximum Protected Income Value will be equal to
200% of the sum of the Protected Income Value as of the effective date of
the step-up plus any subsequent Purchase Payments, minus the impact of any
withdrawals after the date of the step-up.
.. When determining the guaranteed annuity purchase rates for annuity payments
under the GMIB benefit, we will apply such rates based on the number of
years since the most recent step-up.
.. If you elect to step-up the Protected Income Value under the benefit, and
on the date you elect to step-up, the charges under the GMIB benefit have
changed for new purchasers, your benefit may be subject to the new charge
going forward.
.. A step-up will increase the dollar for dollar limit on the anniversary of
the Issue Date of the Annuity following such step-up.
Impact of Withdrawals on the Protected Income Value - Cumulative withdrawals
each Annuity Year up to 5% of the Protected Income Value will reduce the
Protected Income Value on a "dollar-for-dollar" basis (the Protected Income
Value is reduced by the actual amount of the withdrawal). Cumulative
withdrawals in any Annuity Year in excess of 5% of the Protected Income Value
will reduce the Protected Income Value proportionately (see the examples of
this calculation below). The 5% annual withdrawal amount is determined on each
anniversary of the Issue Date (or on the Issue Date for the first Annuity
Year) and applies to any withdrawals during the Annuity Year. This means that
the amount available for withdrawals each Annuity Year on a
"dollar-for-dollar" basis is adjusted on each Annuity anniversary to reflect
changes in the Protected Income Value during the prior Annuity Year.
The Maximum Protected Income Value is reduced by the same dollar-for-dollar
amount as the Protected Income Value is reduced and the same proportional
percentage as the Protected Income Value is reduced.
The following examples of dollar-for-dollar and proportional reductions assume
that: 1.) the Issue Date and the effective date of the GMIB benefit are
October 13, 2005; 2.) an initial Purchase Payment of $250,000; 3.) an initial
Protected Income Value of $250,000; 4.) a dollar-for-dollar limit of $12,500
(5% of $250,000); and 5.) a Maximum Protected Income Value of $500,000 (200%
of the initial Protected Income Value). The values set forth here are purely
hypothetical and do not reflect the charge for GMIB or any other fees and
charges.
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EXAMPLE 1. DOLLAR-FOR-DOLLAR REDUCTION
A $10,000 withdrawal is taken on November 13, 2005 (in the first Annuity
Year). No prior withdrawals or step-ups have been taken. Immediately prior to
the withdrawal, the Protected Income Value is $251,038.10 (the initial value
accumulated for 31 days at an annual effective rate of 5%). As the amount
withdrawn is less than the dollar-for-dollar limit:
.. The Protected Income Value is reduced by the amount withdrawn (i.e., by
$10,000, from $251,038.10 to $241,038.10).
.. The Maximum Protected Income Value is reduced by the amount withdrawn
(i.e., by $10,000 from $500,000.00 to $490,000.00).
.. The remaining dollar-for-dollar limit ("Remaining Limit") for the balance
of the first Annuity Year is also reduced by the amount withdrawn (from
$12,500 to $2,500).
EXAMPLE 2. DOLLAR-FOR-DOLLAR AND PROPORTIONAL REDUCTIONS
A second $10,000 withdrawal is taken on December 13, 2005 (still within the
first Annuity Year). Immediately before the withdrawal, the Account Value is
$220,000, the Protected Income Value is $242,006.64 and the Maximum Protected
Income Value is $490,000.00. As the amount withdrawn exceeds the Remaining
Limit of $2,500 from Example 1:
.. The Protected Income Value is first reduced by the Remaining Limit (from
$242,006.64 to $239,506.64);
.. The result is then further reduced by the ratio of A to B, where:
-- A is the amount withdrawn less the Remaining Limit ($10,000 - $2,500, or
$7,500).
-- B is the Account Value less the Remaining Limit ($220,000 - $2,500, or
$217,500).
The resulting Protected Income Value is: $239,506.64 X (1 - $7,500 /
$217,500), or $231,247.79.
.. The Maximum Protected Income Value is reduced first by the same dollar
amount as the Protected Income Value ($490,000.00 - $2,500 or $487,500.00)
and by the same proportion as for the Protected Income Value ($487,500.00 X
0.9655 or $470,689.66).
.. The Remaining Limit is set to zero (0) for the balance of the first Annuity
Year.
EXAMPLE 3. RESET OF THE DOLLAR-FOR-DOLLAR LIMIT
A $10,000 withdrawal is made on the first anniversary of the Issue Date,
October 13, 2006 (second Annuity Year). Prior to the withdrawal, the Protected
Income Value is $240,838.37 and the Maximum Protected Income Value is
$470,689.66. The Remaining Limit is reset to 5% of the Protected Income Value
amount, or $12,041.92. As the amount withdrawn is less than the
dollar-for-dollar limit:
.. The Protected Income Value is reduced by the amount withdrawn (i.e.,
reduced by $10,000, from $240,838.37 to $230,838.37).
.. The Maximum Protected Income Value is also reduced by the amount withdrawn
(i.e., by $10,000 from $470,689.66, to $460,689.66).
.. The Remaining Limit for the balance of the second Annuity Year is also
reduced by the amount withdrawn (from $12,041.92 to $2,041.92).
KEY FEATURE - GMIB ANNUITY PAYMENTS
You can elect to apply the Protected Income Value to one of the available GMIB
Annuity Payment Options on any anniversary date following the initial waiting
period, or any subsequent waiting period established upon your election to
step-up the Protected Income Value. Once you have completed the waiting
period, you will have a 30-day period each year, prior to the Annuity
anniversary, during which you may elect to begin receiving annuity payments
under one of the available GMIB Annuity Payment Options. You must elect one of
the GMIB Annuity Payment Options by the anniversary of the Annuity's Issue
Date on or immediately following the Annuitant's or your 95/th/ birthday
(whichever is sooner), except for Annuities used as a funding vehicle for an
IRA, SEP IRA or 403(b), in which case you must elect one of the GMIB Annuity
Payment Options by the anniversary of the Annuity's Issue Date on or
immediately following the Annuitant's 92/nd/ birthday.
Your Annuity or state law may require you to begin receiving annuity payments
at an earlier date.
The amount of each GMIB Annuity Payment will be determined based on the age
and, where permitted by law, sex of the Annuitant by applying the Protected
Income Value (net of any applicable tax charge that may be due) to the GMIB
Annuity Payment Option you choose. We use special annuity purchase rates to
calculate the amount of each payment due under the GMIB Annuity Payment
Options. These special rates for the GMIB Annuity Payment Options are
calculated using an assumed interest rate factor that provides for lower
growth in the value applied to produce annuity payments than if you elected an
annuity payment option that is not part of the GMIB benefit. These special
rates also are calculated using other factors such as "age setbacks" (use of
an age lower than the Annuitant's actual age) that result in lower payments
than would result if you elected an annuity payment option that is not part of
the GMIB benefit. Use of an age setback entails a longer assumed life for the
Annuitant which in turn results in lower annuity payments.
ON THE DATE THAT YOU ELECT TO BEGIN RECEIVING GMIB ANNUITY PAYMENTS, WE
GUARANTEE THAT YOUR PAYMENTS WILL BE CALCULATED BASED ON YOUR ACCOUNT VALUE
AND OUR THEN CURRENT ANNUITY PURCHASE RATES IF THE PAYMENT AMOUNT CALCULATED
ON THIS BASIS WOULD BE HIGHER THAN IT WOULD BE BASED ON THE PROTECTED INCOME
VALUE AND THE SPECIAL GMIB ANNUITY PURCHASE RATES.
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GMIB ANNUITY PAYMENT OPTION 1 - PAYMENTS FOR LIFE WITH A CERTAIN PERIOD
Under this option, monthly annuity payments will be made until the death of
the Annuitant. If the Annuitant dies before having received 120 monthly
annuity payments, the remainder of the 120 monthly annuity payments will be
made to the Beneficiary.
GMIB ANNUITY PAYMENT OPTION 2 - PAYMENTS FOR JOINT LIVES WITH A CERTAIN PERIOD
Under this option, monthly annuity payments will be made until the death of
both the Annuitant and the Joint Annuitant. If the Annuitant and the Joint
Annuitant die before having received 120 monthly annuity payments, the
remainder of the 120 monthly annuity payments will be made to the Beneficiary.
.. If the Annuitant dies first, we will continue to make payments until the
later of the death of the Joint Annuitant and the end of the period
certain. However, if the Joint Annuitant is still receiving annuity
payments following the end of the certain period, we will reduce the amount
of each subsequent payment to 50% of the original payment amount.
.. If the Joint Annuitant dies first, we will continue to make payments until
the later of the death of the Annuitant and the end of the period certain.
You cannot withdraw your Account Value or the Protected Income Value under
either GMIB Annuity Payment Option once annuity payments have begun. We may
make other payout frequencies available, such as quarterly, semi-annually or
annually.
OTHER IMPORTANT CONSIDERATIONS
YOU SHOULD NOTE THAT GMIB IS DESIGNED TO PROVIDE A TYPE OF INSURANCE THAT
SERVES AS A SAFETY NET ONLY IN THE EVENT YOUR ACCOUNT VALUE DECLINES
SIGNIFICANTLY DUE TO NEGATIVE INVESTMENT PERFORMANCE. IF YOUR ACCOUNT VALUE IS
NOT SIGNIFICANTLY AFFECTED BY NEGATIVE INVESTMENT PERFORMANCE, IT IS UNLIKELY
THAT THE PURCHASE OF THE GMIB WILL RESULT IN YOUR RECEIVING LARGER ANNUITY
PAYMENTS THAN IF YOU HAD NOT PURCHASED GMIB. This is because the assumptions
that we use in computing the GMIB, such as the annuity purchase rates, (which
include assumptions as to age-setbacks and assumed interest rates), are more
conservative than the assumptions that we use in computing annuity payout
options outside of GMIB. Therefore, you may generate higher income payments if
you were to annuitize a lower Account Value at the current annuity purchase
rates, than if you were to annuitize under the GMIB with a higher Protected
Value than your Account Value but, at the annuity purchase rates guaranteed
under the GMIB. The GMIB benefit does not directly affect an Annuity's Account
Value, Surrender Value or the amount payable under either the basic Death
Benefit provision of the Annuity or any optional Death Benefit provision. If
you surrender your Annuity, you will receive the current Surrender Value, not
the Protected Income Value. The Protected Income Value is only applicable if
you elect to begin receiving annuity payments under one of the GMIB annuity
options after the waiting period.
.. Each Annuity offers other annuity payment options that you can elect which
do not impose an additional charge, but which do not offer to guarantee a
minimum value on which to make annuity payments.
.. Where allowed by law, we reserve the right to limit subsequent Purchase
Payments if we determine, at our sole discretion, that based on the timing
of your Purchase Payments and withdrawals, your Protected Income Value is
increasing in ways we did not intend. In determining whether to limit
Purchase Payments, we will look at Purchase Payments which are
disproportionately larger than your initial Purchase Payment and other
actions that may artificially increase the Protected Income Value.
.. We currently limit the Sub-accounts in which you may allocate Account Value
if you participate in this benefit. Should we prohibit access to any
investment option, any transfers required to move Account Value to eligible
investment options will not be counted in determining the number of free
transfers during an Annuity Year.
.. If you change the Annuitant after the effective date of the GMIB benefit,
the period of time during which we will apply the 5% annual growth rate may
be changed based on the age of the new Annuitant. If the new Annuitant
would not be eligible to elect the GMIB benefit based on his or her age at
the time of the change, then the GMIB benefit will terminate.
.. Annuity payments made under the GMIB benefit are subject to the same tax
treatment as any other annuity payment.
.. At the time you elect to begin receiving annuity payments under the GMIB
benefit or under any other annuity payment option we make available, the
protection provided by an Annuity's basic Death Benefit or any optional
Death Benefit provision you elected will no longer apply.
ELECTION OF THE BENEFIT
The GMIB benefit is no longer available. If you currently participate in GMIB,
your existing guarantees are unaffected by the fact that we no longer offer
GMIB.
TERMINATION OF THE BENEFIT
The GMIB benefit cannot be terminated by the Owner once elected. The GMIB
benefit automatically terminates as of the date your Annuity is fully
surrendered, on the date the Death Benefit is payable to your Beneficiary
(unless your surviving spouse elects to continue your Annuity), or on the date
that your Account Value is transferred to begin making annuity payments. The
GMIB benefit may also be terminated if you designate a new Annuitant who would
not be eligible to elect the GMIB benefit based on his or her age at the time
of the change.
Upon termination of the GMIB benefit we will deduct the charge from your
Account Value for the portion of the Annuity Year since the prior anniversary
of the Annuity's Issue Date (or the Issue Date if in the first Annuity Year).
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CHARGES UNDER THE BENEFIT
Currently, we deduct a charge equal to 0.50% per year of the average Protected
Income Value for the period the charge applies. Because the charge is
calculated based on the average Protected Income Value, it does not increase
or decrease based on changes to the Annuity's Account Value due to market
performance. The dollar amount you pay each year will increase in any year the
Protected Income Value increases, and it will decrease in any year the
Protected Income Value decreases due to withdrawal, irrespective of whether
your Account Value increases or decreases.
The charge is deducted annually in arrears each Annuity Year on the
anniversary of the Issue Date of an Annuity. We deduct the amount of the
charge pro-rata from the Account Value allocated to the Sub-accounts and the
Fixed Allocations. No MVA will apply to Account Value deducted from a Fixed
Allocation. If you surrender your Annuity, begin receiving annuity payments
under the GMIB benefit or any other annuity payment option we make available
during an Annuity Year, or the GMIB benefit terminates, we will deduct the
charge for the portion of the Annuity Year since the prior anniversary of the
Annuity's Issue Date (or the Issue Date if in the first Annuity Year).
No charge applies after the Annuity Date.
LIFETIME FIVE INCOME BENEFIT (LIFETIME FIVE)
The Lifetime Five Income Benefit is no longer being offered. Lifetime Five
could have been elected only where the Annuitant and the Owner were the same
person or, if the Annuity Owner is an entity, where there was only one
Annuitant. The Annuitant must have been at least 45 years old when the benefit
is elected. The Lifetime Five Income Benefit was not available if you elected
any other optional living benefit. As long as your Lifetime Five Income
Benefit is in effect, you must allocate your Account Value in accordance with
the then permitted and available option(s) with this benefit.
The benefit guarantees your ability to withdraw amounts equal to a percentage
of an initial principal value (called the "Protected Withdrawal Value"),
regardless of the impact of market performance on your Account Value, subject
to our benefit rules regarding the timing and amount of withdrawals. There are
two options - one is designed to provide an annual withdrawal amount for life
(the "Life Income Benefit") and the other is designed to provide a greater
annual withdrawal amount as long as there is Protected Withdrawal Value
(adjusted as described below) (the "Withdrawal Benefit"). If there is no
Protected Withdrawal Value, the withdrawal benefit will be zero. You do not
choose between these two options; each option will continue to be available as
long as your Annuity has an Account Value and the Lifetime Five is in effect.
Certain benefits under Lifetime Five may remain in effect even if the Account
Value of your Annuity is zero. The benefit may be appropriate if you intend to
make periodic withdrawals from your Annuity and wish to ensure that market
performance will not affect your ability to receive annual payments. You are
not required to make withdrawals as part of the benefit - the guarantees are
not lost if you withdraw less than the maximum allowable amount each year
under the rules of the benefit. Withdrawals are taken first from your own
Account Value. We are only required to begin making lifetime income payments
to you under our guarantee when and if your Account Value is reduced to zero
(unless the benefit has terminated).
KEY FEATURE - PROTECTED WITHDRAWAL VALUE
The Protected Withdrawal Value is used to determine the amount of each annual
payment under the Life Income Benefit and the Withdrawal Benefit. The initial
Protected Withdrawal Value is determined as of the date you make your first
withdrawal under your Annuity following your election of Lifetime Five. The
initial Protected Withdrawal Value is equal to the greater of (A) the Account
Value on the date you elect Lifetime Five, plus any additional Purchase
Payments, as applicable, each growing at 5% per year from the date of your
election of the benefit, or application of the Purchase Payment to your
Annuity until the date of your first withdrawal or the 10/th/ anniversary of
the benefit effective date, if earlier (B) the Account Value on the date of
the first withdrawal from your Annuity, prior to the withdrawal, and (C) the
highest Account Value on each Annuity anniversary, plus subsequent Purchase
Payments prior to the first withdrawal or the 10/th/ anniversary of the
benefit effective date, if earlier. With respect to (A) and (C) above, after
the 10/th/ anniversary of the benefit effective date, each value is increased
by the amount of any subsequent Purchase Payments.
.. If you elected the Lifetime Five benefit at the time you purchase your
Annuity, the Account Value will be your initial Purchase Payment.
.. If you make additional Purchase Payments after your first withdrawal, the
Protected Withdrawal Value will be increased by the amount of each
additional Purchase Payment.
The Protected Withdrawal Value is reduced each time a withdrawal is made on a
dollar-for-dollar basis up to the Annual Withdrawal Amount, per Annuity Year,
of the Protected Withdrawal Value and on the greater of a dollar-for-dollar
basis or a pro rata basis for withdrawals in an Annuity Year in excess of that
amount until the Protected Withdrawal Value is reduced to zero. At that point
the Annual Withdrawal Amount will be zero until such time (if any) as the
Annuity reflects a Protected Withdrawal Value (for example, due to a step-up
or additional Purchase Payments being made into the Annuity).
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STEP-UP OF THE PROTECTED WITHDRAWAL VALUE
You may elect to step-up your Protected Withdrawal Value if, due to positive
market performance, your Account Value is greater than the Protected
Withdrawal Value.
If you elected the Lifetime Five benefit on or after March 20, 2006:
.. you are eligible to step-up the Protected Withdrawal Value on or after the
1/st/ anniversary of the first withdrawal under the Lifetime Five benefit
.. the Protected Withdrawal Value can be stepped up again on or after the
1/st/ anniversary of the preceding step-up
If you elected the Lifetime Five benefit prior to March 20, 2006 and that
original election remains in effect:
.. you are eligible to step-up the Protected Withdrawal Value on or after the
5/th/ anniversary of the first withdrawal under the Lifetime Five benefit
.. the Protected Withdrawal Value can be stepped up again on or after the
5/th/ anniversary of the preceding step-up
In either scenario (i.e., elections before or after March 20, 2006) if you
elect to step-up the Protected Withdrawal Value under the benefit, and on the
date you elect to step-up, the charges under the Lifetime Five benefit have
changed for new purchasers, your benefit may be subject to the new charge at
the time of step-up. Upon election of the step-up, we increase the Protected
Withdrawal Value to be equal to the then current Account Value. For example,
assume your initial Protected Withdrawal Value was $100,000 and you have made
cumulative withdrawals of $40,000, reducing the Protected Withdrawal Value to
$60,000. On the date you are eligible to step-up the Protected Withdrawal
Value, your Account Value is equal to $75,000. You could elect to step-up the
Protected Withdrawal Value to $75,000 on the date you are eligible. If your
current Annual Income Amount and Annual Withdrawal Amount are less than they
would be if we did not reflect the step-up in Protected Withdrawal Value, then
we will increase these amounts to reflect the step-up as described below.
An optional automatic step-up ("Auto Step-Up") feature is available for this
benefit. This feature may be elected at the time the benefit is elected or at
any time while the benefit is in force.
If you elected the Lifetime Five benefit on or after March 20, 2006 and have
also elected the Auto Step-Up feature:
.. the first Auto Step-Up opportunity will occur on the 1/st/ Annuity
Anniversary that is at least one year after the later of (1) the date of
the first withdrawal under the Lifetime Five benefit or (2) the most recent
step-up
.. your Protected Withdrawal Value will only be stepped-up if 5% of the
Account Value is greater than the Annual Income Amount by any amount
.. if at the time of the first Auto Step-Up opportunity, 5% of the Account
Value is not greater than the Annual Income Amount, an Auto Step-Up
opportunity will occur on each successive Annuity Anniversary until a
step-up occurs
.. once a step-up occurs, the next Auto Step-Up opportunity will occur on the
1/st/ Annuity Anniversary that is at least one year after the most recent
step-up
If you elected the Lifetime Five benefit prior to March 20, 2006 and have also
elected the Auto Step-Up feature:
.. the first Auto Step-Up opportunity will occur on the Annuity Anniversary
that is at least 5 years after the later of (1) the date of the first
withdrawal under the Lifetime Five Benefit or (2) the most recent step-up
.. your Protected Withdrawal Value will only be stepped-up if 5% of the
Account Value is greater than the Annual Income Amount by 5% or more
.. if at the time of the first Auto Step-Up opportunity, 5% of the Account
Value does not exceed the Annual Income Amount by 5% or more, an Auto
Step-Up opportunity will occur on each successive Annuity Anniversary until
a step-up occurs
.. once a step-up occurs, the next Auto Step-Up opportunity will occur on the
Annuity Anniversary that is at least 5 years after the most recent step-up
In either scenario (i.e., elections before or after March 20, 2006), if on the
date that we implement an Auto Step-Up to your Protected Withdrawal Value, the
charge for Lifetime Five has changed for new purchasers, you may be subject to
the new charge at the time of such step-up. Subject to our rules and
restrictions, you will still be permitted to manually step-up the Protected
Withdrawal Value even if you elect the Auto Step-Up feature.
KEY FEATURE - ANNUAL INCOME AMOUNT UNDER THE LIFE INCOME BENEFIT
The initial Annual Income Amount is equal to 5% of the initial Protected
Withdrawal Value at the first withdrawal taken after the benefit becomes
active. Under the Lifetime Five benefit, if your cumulative withdrawals in an
Annuity Year are less than or equal to the Annual Income Amount, they will not
reduce your Annual Income Amount in subsequent Annuity Years, but any such
withdrawals will reduce the Annual Income Amount on a dollar-for-dollar basis
in that Annuity Year. If your cumulative withdrawals are in excess of the
Annual Income Amount ("Excess Income"), your Annual Income Amount in
subsequent years will be reduced (except with regard to required minimum
distributions) by the result of the ratio of the Excess Income to the Account
Value immediately prior to such withdrawal (see examples of this calculation
below). Reductions include the actual amount of the withdrawal. A withdrawal
can be considered Excess Income under the Life Income Benefit even though it
does not
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exceed the Annual Withdrawal Amount under the Withdrawal Benefit. When you
elect a step-up (or an auto step-up is effected), your Annual Income Amount
increases to equal 5% of your Account Value after the step-up if such amount
is greater than your Annual Income Amount. Your Annual Income Amount also
increases if you make additional Purchase Payments. The amount of the increase
is equal to 5% of any additional Purchase Payments. Any increase will be added
to your Annual Income Amount beginning on the day that the step-up is
effective or the Purchase Payment is made. A determination of whether you have
exceeded your Annual Income Amount is made at the time of each withdrawal;
therefore a subsequent increase in the Annual Income Amount will not offset
the effect of a withdrawal that exceeded the Annual Income Amount at the time
the withdrawal was made.
KEY FEATURE - ANNUAL WITHDRAWAL AMOUNT UNDER THE WITHDRAWAL BENEFIT
The initial Annual Withdrawal Amount is equal to 7% of the initial Protected
Withdrawal Value. Under the Lifetime Five benefit, if your cumulative
withdrawals each Annuity Year are less than or equal to the Annual Withdrawal
Amount, your Protected Withdrawal Value will be reduced on a dollar-for-dollar
basis. If your cumulative withdrawals are in excess of the Annual Withdrawal
Amount ("Excess Withdrawal"), your Annual Withdrawal Amount will be reduced
(except with regard to required minimum distributions) by the result of the
ratio of the Excess Withdrawal to the Account Value immediately prior to such
withdrawal (see the examples of this calculation below). Reductions include
the actual amount of the withdrawal. When you elect a step-up (or an auto
step-up is effected), your Annual Withdrawal Amount increases to equal 7% of
your Account Value after the step-up if such amount is greater than your
Annual Withdrawal Amount. Your Annual Withdrawal Amount also increases if you
make additional Purchase Payments. The amount of the increase is equal to 7%
of any additional Purchase Payments. A determination of whether you have
exceeded your Annual Withdrawal Amount is made at the time of each withdrawal;
therefore, a subsequent increase in the Annual Withdrawal Amount will not
offset the effect of a withdrawal that exceeded the Annual Withdrawal Amount
at the time the withdrawal was made.
The Lifetime Five benefit does not affect your ability to make withdrawals
under your Annuity or limit your ability to request withdrawals that exceed
the Annual Income Amount and the Annual Withdrawal Amount. You are not
required to withdraw all or any portion of the Annual Withdrawal Amount or
Annual Income Amount in each Annuity Year.
.. If, cumulatively, you withdraw an amount less than the Annual Withdrawal
Amount under the Withdrawal Benefit in any Annuity Year, you cannot
carry-over the unused portion of the Annual Withdrawal Amount to subsequent
Annuity Years. However, because the Protected Withdrawal Value is only
reduced by the actual amount of withdrawals you make under these
circumstances, any unused Annual Withdrawal Amount may extend the period of
time until the remaining Protected Withdrawal Value is reduced to zero.
.. If, cumulatively, you withdraw an amount less than the Annual Income Amount
under the Life Income Benefit in any Annuity Year, you cannot carry-over
the unused portion of the Annual Income Amount to subsequent Annuity Years.
However, because the Protected Withdrawal Value is only reduced by the
actual amount of withdrawals you make under these circumstances, any unused
Annual Income Amount may extend the period of time until the remaining
Protected Withdrawal Value is reduced to zero.
EXAMPLES OF WITHDRAWALS
The following examples of dollar-for-dollar and proportional reductions of the
Protected Withdrawal Value, Annual Withdrawal Amount and Annual Income Amount
assume: 1.) the Issue Date and the Effective Date of the Lifetime Five benefit
are February 1, 2005; 2.) an initial Purchase Payment of $250,000; 3.) the
Account Value on February 1, 2006 is equal to $265,000; and 4.) the first
withdrawal occurs on March 1, 2006 when the Account Value is equal to
$263,000. The values set forth here are purely hypothetical, and do not
reflect the charge for Lifetime Five or any other fees and charges.
The initial Protected Withdrawal Value is calculated as the greatest of (a),
(b) and (c):
(a)Purchase payment accumulated at 5% per year from February 1, 2005 until
March 1, 2006 (393 days) = $250,000 X 1.05/(393/365)/ = $263,484.33
(b)Account Value on March 1, 2006 (the date of the first withdrawal) = $263,000
(c)Account Value on February 1, 2006 (the first Annuity Anniversary) = $265,000
Therefore, the initial Protected Withdrawal Value is equal to $265,000. The
Annual Withdrawal Amount is equal to $18,550 under the Withdrawal Benefit (7%
of $265,000). The Annual Income Amount is equal to $13,250 under the Life
Income Benefit (5% of $265,000).
EXAMPLE 1. DOLLAR-FOR-DOLLAR REDUCTION
If $10,000 was withdrawn (less than both the Annual Income Amount and the
Annual Withdrawal Amount) on March 1, 2006, then the following values would
result:
.. Remaining Annual Withdrawal Amount for current Annuity Year = $18,550 -
$10,000 = $8,550.
Annual Withdrawal Amount for future Annuity Years remains at $18,550.
.. Remaining Annual Income Amount for current Annuity Year = $13,250 - $10,000
= $3,250.
Annual Income Amount for future Annuity Years remains at $13,250.
.. Protected Withdrawal Value is reduced by $10,000 from $265,000 to $255,000
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EXAMPLE 2. DOLLAR-FOR-DOLLAR AND PROPORTIONAL REDUCTIONS
(a)If $15,000 was withdrawn (more than the Annual Income Amount but less than
the Annual Withdrawal Amount) on March 1, 2006, then the following values
would result:
. Remaining Annual Withdrawal Amount for current Annuity Year = $18,550 -
$15,000 = $3,550. Annual Withdrawal Amount for future Annuity Years
remains at $18,550
. Remaining Annual Income Amount for current Annuity Year = $0
Excess of withdrawal over the Annual Income Amount ($15,000 - $13,250 =
$1,750) reduces Annual Income Amount for future Annuity Years.
.. Reduction to Annual Income Amount = Excess Income/Account Value before
Excess Income X Annual Income Amount = $1,750/($263,000 - $13,250) X
$13,250 = $93
Annual Income Amount for future Annuity Years = $13,250 - $93 = $13,157
.. Protected Withdrawal Value is reduced by $15,000 from $265,000 to $250,000
(b)If $25,000 was withdrawn (more than both the Annual Income Amount and the
Annual Withdrawal Amount) on March 1, 2006, then the following values would
result:
. Remaining Annual Withdrawal Amount for current Annuity Year = $0
Excess of withdrawal over the Annual Withdrawal Amount ($25,000 - $18,550 =
$6,450) reduces Annual Withdrawal Amount for future Annuity Years.
.. Reduction to Annual Withdrawal Amount = Excess Withdrawal/Account Value
before Excess Withdrawal X Annual Withdrawal Amount = $6,450/($263,000 -
$18,550) X $18,550 = $489
Annual Withdrawal Amount for future Annuity Years = $18,550 - $489 = $18,061
.. Remaining Annual Income Amount for current Annuity Year = $0
Excess of withdrawal over the Annual Income Amount ($25,000 - $13,250 =
$11,750) reduces Annual Income Amount for future Annuity Years.
.. Reduction to Annual Income Amount = Excess Income/Account Value before
Excess Income X Annual Income Amount = $11,750/($263,000 - $13,250) X
$13,250 = $623.
Annual Income Amount for future Annuity Years = $13,250 - $623 = $12,627
.. Protected Withdrawal Value is first reduced by the Annual Withdrawal Amount
($18,550) from $265,000 to $246,450. It is further reduced by the greater
of a dollar-for-dollar reduction or a proportional reduction.
Dollar-for-dollar reduction = $25,000 - $18,550 = $6,450
.. Proportional reduction = Excess Withdrawal/Account Value before Excess
Withdrawal X Protected Withdrawal Value = $6,450/($263,000 - $18,550) X
$246,450 = $6,503 Protected Withdrawal Value = $246,450 - max {$6,450,
$6,503} = $239,947
BENEFITS UNDER THE LIFETIME FIVE BENEFIT
.. If your Account Value is equal to zero, and the cumulative withdrawals in
the current Annuity Year are greater than the Annual Withdrawal Amount, the
Lifetime Five benefit will terminate. To the extent that your Account Value
was reduced to zero as a result of cumulative withdrawals that are equal to
or less than the Annual Income Amount and amounts are still payable under
both the Life Income Benefit and the Withdrawal Benefit, you will be given
the choice of receiving the payments under the Life Income Benefit or under
the Withdrawal Benefit. Thus, in that scenario, the remaining amounts under
the Life Income Benefit and the Withdrawal Benefit would be payable even
though your Account Value was reduced to zero. Once you make this election
we will make an additional payment for that Annuity Year equal to either
the remaining Annual Income Amount or Annual Withdrawal Amount for the
Annuity Year, if any, depending on the option you choose. In subsequent
Annuity Years we make payments that equal either the Annual Income Amount
or the Annual Withdrawal Amount as described in this Prospectus. You will
not be able to change the option after your election and no further
Purchase Payments will be accepted under your Annuity. If you do not make
an election, we will pay you annually under the Life Income Benefit. To the
extent that cumulative withdrawals in the current Annuity Year that reduced
your Account Value to zero are more than the Annual Income Amount but less
than or equal to the Annual Withdrawal Amount and amounts are still payable
under the Withdrawal Benefit, you will receive the payments under the
Withdrawal Benefit. In the year of a withdrawal that reduced your Account
Value to zero, we will make an additional payment to equal any remaining
Annual Withdrawal Amount and make payments equal to the Annual Withdrawal
Amount in each subsequent year (until the Protected Withdrawal Value is
depleted). Once your Account Value equals zero no further Purchase Payments
will be accepted under your Annuity.
.. If annuity payments are to begin under the terms of your Annuity or if you
decide to begin receiving annuity payments and there is any Annual Income
Amount due in subsequent Annuity Years or any remaining Protected
Withdrawal Value, you can elect one of the following three options:
(1)apply your Account Value to any annuity option available; or
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(2)request that, as of the date annuity payments are to begin, we make
annuity payments each year equal to the Annual Income Amount. We make
such annuity payments until the Annuitant's death; or
(3)request that, as of the date annuity payments are to begin, we pay
out any remaining Protected Withdrawal Value as annuity payments.
Each year such annuity payments will equal the Annual Withdrawal
Amount or the remaining Protected Withdrawal Value if less. We make
such annuity payments until the earlier of the Annuitant's death or
the date the Protected Withdrawal Value is depleted.
We must receive your request in a form acceptable to us at our office.
.. In the absence of an election when mandatory annuity payments are to begin,
we will make annual annuity payments as a single life fixed annuity with
five payments certain using the greater of the annuity rates then currently
available or the annuity rates guaranteed in your Annuity. The amount that
will be applied to provide such annuity payments will be the greater of:
(1)the present value of future Annual Income Amount payments. Such
present value will be calculated using the greater of the single life
fixed annuity rates then currently available or the single life fixed
annuity rates guaranteed in your Annuity; and
(2)the Account Value.
.. If no withdrawal was ever taken, we will determine a Protected Withdrawal
Value and calculate an Annual Income Amount and an Annual Withdrawal Amount
as if you made your first withdrawal on the date the annuity payments are
to begin.
OTHER IMPORTANT CONSIDERATIONS
.. Withdrawals under the Lifetime Five benefit are subject to all of the terms
and conditions of your Annuity.
.. Withdrawals made while the Lifetime Five benefit is in effect will be
treated, for tax purposes, in the same way as any other withdrawals under
your Annuity. The Lifetime Five benefit does not directly affect your
Annuity's Account Value or Surrender Value, but any withdrawal will
decrease the Account Value by the amount of the withdrawal. If you
surrender your Annuity, you will receive the current Surrender Value, not
the Protected Withdrawal Value.
.. You can make withdrawals from your Annuity while your Account Value is
greater than zero without purchasing the Lifetime Five benefit. The
Lifetime Five benefit provides a guarantee that if your Account Value
declines due to market performance, you will be able to receive your
Protected Withdrawal Value or Annual Income Amount in the form of periodic
benefit payments.
.. You should carefully consider when to begin taking withdrawals. If you
begin taking withdrawals early, you may maximize the time during which you
may take withdrawals due to longer life expectancy, and you will be using
an optional benefit for which you are paying a charge. On the other hand,
you could limit the value of the benefit if you begin taking withdrawals
too soon. For example, withdrawals reduce your Account Value and may limit
the potential for increasing your Protected Withdrawal Value. You should
discuss with your Financial Professional when it may be appropriate for you
to begin taking withdrawals.
.. In general, you must allocate your Account Value in accordance with the
then available investment option(s) that we may prescribe in order to
maintain the benefit. If, subsequent to your election of the benefit, we
change our requirements for how Account Value must be allocated under the
benefit, we will not compel you to re-allocate your Account Value in
accordance with our newly-adopted requirements. Subsequent to any change in
requirements, transfers of Account Value and allocation of additional
Purchase Payments may be subject to the new investment limitations.
.. You will begin paying the charge for this benefit as of the effective date
of the benefit, even if you do not begin taking withdrawals for many years,
or ever. We will not refund the charges you have paid if you choose never
to take any withdrawals and/or if you never receive any lifetime income
payments.
.. The Basic Death Benefit will terminate if withdrawals taken under the
Lifetime Five benefit cause your Account Value to reduce to zero. Certain
optional Death Benefits may terminate if withdrawals taken under the
Lifetime Five benefit cause your Account Value to reduce to zero. (See
"Death Benefit" for more information.)
ELECTION OF THE BENEFIT
We no longer permit elections of Lifetime Five. If you wish, you may cancel
the Lifetime Five benefit. You may then elect any other available living
benefit, on the Valuation Day after you have cancelled the Lifetime Five
benefit provided, the request is received in good order (subject to state
availability and in accordance with any applicable age requirements). Once the
Lifetime Five benefit is canceled you are not required to re-elect another
optional living benefit and any subsequent benefit election may be made on or
after the first Valuation Day following the cancellation of the Lifetime Five
benefit provided that the benefit you are looking to elect is available on a
post- issue basis. IF YOU CANCEL LIFETIME FIVE, YOU LOSE ALL GUARANTEES UNDER
THE BENEFIT AND WE WILL BASE ANY GUARANTEES UNDER THE NEW BENEFIT ON YOUR
ACCOUNT VALUE AS OF THE DATE THE NEW BENEFIT BECOMES ACTIVE. ANY SUCH NEW
BENEFIT MAY BE MORE EXPENSIVE.
TERMINATION OF THE BENEFIT
The benefit terminates automatically when your Protected Withdrawal Value and
Annual Income Amount equal zero. You may terminate the benefit at any time by
notifying us. If you terminate the benefit, any guarantee provided by the
benefit will terminate as of the date the termination is effective. The
benefit terminates upon your surrender of your Annuity, upon the death of the
Annuitant, upon a change in ownership of your Annuity that changes the tax
identification number of the Owner, upon change in the Annuitant or upon your
election to begin receiving annuity payments. While you may terminate your
benefit at any time, we may not terminate the benefit other than in the
circumstances listed above.
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The charge for the Lifetime Five benefit will no longer be deducted from your
Account Value upon termination of the benefit.
ADDITIONAL TAX CONSIDERATIONS
If you purchase an Annuity as an investment vehicle for "qualified"
investments, including an IRA, SEP-IRA, Tax Sheltered Annuity (or 403(b)) or
employer plan under Code Section 401(a), the Required Minimum Distribution
rules under the Code provide that you begin receiving periodic amounts from
your Annuity beginning after age 70 1/2. For a Tax Sheltered Annuity or a
401(a) plan for which the participant is not a greater than five (5) percent
owner of the employer, this required beginning date can generally be deferred
to retirement, if later. Roth IRAs are not subject to these rules during the
Owner's lifetime. The amount required under the Code may exceed the Annual
Withdrawal Amount and the Annual Income Amount, which will cause us to
increase the Annual Income Amount and the Annual Withdrawal Amount in any
Annuity Year that Required Minimum Distributions due from your Annuity are
greater than such amounts. Any such payments will reduce your Protected
Withdrawal Value. In addition, the amount and duration of payments under the
annuity payment and Death Benefit provisions may be adjusted so that the
payments do not trigger any penalty or excise taxes due to tax considerations
such as Required Minimum Distribution provisions under the tax law.
As indicated, withdrawals made while this Benefit is in effect will be
treated, for tax purposes, in the same way as any other withdrawals under the
Annuity. Please see the Tax Considerations section of this prospectus for a
detailed discussion of the tax treatment of withdrawals. We do not address
each potential tax scenario that could arise with respect to this Benefit here.
SPOUSAL LIFETIME FIVE INCOME BENEFIT (SPOUSAL LIFETIME FIVE)
The Spousal Lifetime Five benefit is no longer being offered. Spousal Lifetime
Five must have been elected based on two Designated Lives, as described below.
Each Designated Life must have been at least 55 years old when the benefit was
elected. The Spousal Lifetime Five benefit was not available if you elected
any other optional living benefit or optional death benefit. As long as your
Spousal Lifetime Five Income Benefit is in effect, you must allocate your
Account Value in accordance with the then permitted and available option(s)
with this benefit.
The benefit guarantees until the later death of two natural persons that are
each other's spouses at the time of election of Spousal Lifetime Five and at
the first death of one of them (the "Designated Lives", each a "Designated
Life") the ability to withdraw an annual amount ("Spousal Life Income
Benefit") equal to a percentage of an initial principal value (the "Protected
Withdrawal Value") regardless of the impact of market performance on the
Account Value, subject to our benefit rules regarding the timing and amount of
withdrawals. The Spousal Life Income Benefit may remain in effect even if the
Account Value of the Annuity is zero. The benefit may be appropriate if you
intend to make periodic withdrawals from your Annuity, wish to ensure that
market performance will not affect your ability to receive annual payments,
and wish either spouse to be able to continue the Spousal Life Income Benefit
after the death of the first. You are not required to make withdrawals as part
of the benefit - the guarantees are not lost if you withdraw less than the
maximum allowable amount each year under the rules of the benefit. Withdrawals
are taken first from your own Account Value. We are only required to begin
making lifetime income payments to you under the Spousal Lifetime Income
Benefit when and if your Account Value is reduced to zero (unless the benefit
has terminated).
KEY FEATURE - INITIAL PROTECTED WITHDRAWAL VALUE
The Protected Withdrawal Value is used to determine the amount of each annual
payment under the Spousal Life Income Benefit. The initial Protected
Withdrawal Value is determined as of the date you make your first withdrawal
under the Annuity following your election of Spousal Lifetime Five. The
initial Protected Withdrawal Value is equal to the greater of (A) the Account
Value on the date you elect Spousal Lifetime Five, plus any additional
Purchase Payments as applicable, each growing at 5% per year from the date of
your election of the benefit, or application of the Purchase Payment to your
Annuity, until the date of your first withdrawal or the 10/th/ anniversary of
the benefit effective date, if earlier (B) the Account Value on the date of
the first withdrawal from your Annuity, prior to the withdrawal, and (C) the
highest Account Value on each Annuity anniversary, plus subsequent Purchase
Payments prior to the first withdrawal or the 10/th/ anniversary of the
benefit effective date, if earlier. With respect to (A) and (C) above, after
the 10/th/ anniversary of the benefit effective date, each value is increased
by the amount of any subsequent Purchase Payments.
KEY FEATURE - ANNUAL INCOME AMOUNT UNDER THE SPOUSAL LIFETIME FIVE INCOME
BENEFIT
The initial Annual Income Amount is equal to 5% of the initial Protected
Withdrawal Value at the first withdrawal taken after the benefit becomes
active. Under the Spousal Lifetime Five benefit, if your cumulative
withdrawals in an Annuity Year are less than or equal to the Annual Income
Amount, they will not reduce your Annual Income Amount in subsequent Annuity
Years, but any such withdrawals will reduce the Annual Income Amount on a
dollar-for-dollar basis in that Annuity Year. If, cumulatively, you withdraw
an amount less than the Annual Income Amount under the Spousal Life Income
Benefit in any Annuity Year, you cannot carry-over the unused portion of the
Annual Income Amount to subsequent Annuity Years. If your cumulative
withdrawals are in excess of the Annual Income Amount ("Excess Income"), your
Annual Income Amount in subsequent years will be reduced (except with regard
to required minimum distributions) by the result of the ratio of the Excess
Income to the Account Value immediately prior to such withdrawal (see examples
of this calculation below). Reductions include the actual amount of the
withdrawal. The Spousal Lifetime Five benefit does not affect your ability to
make withdrawals under your Annuity or limit your ability to request
withdrawals that exceed the Annual Income Amount.
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STEP-UP OF ANNUAL INCOME AMOUNT
You may elect to step-up your Annual Income Amount if, due to positive market
performance, 5% of your Account Value is greater than the Annual Income
Amount. You are eligible to step-up the Annual Income Amount on or after the
1/st/ anniversary of the first withdrawal under the Spousal Lifetime Five
benefit. The Annual Income Amount can be stepped up again on or after the
1/st/ anniversary of the preceding step-up. If you elect to step-up the Annual
Income Amount under the benefit, and on the date you elect to step-up, the
charges under the Spousal Lifetime Five benefit have changed for new
purchasers, your benefit may be subject to the new charge at the time of such
step-up. When you elect a step-up, your Annual Income Amount increases to
equal 5% of your Account Value after the step-up. Your Annual Income Amount
also increases if you make additional Purchase Payments. The amount of the
increase is equal to 5% of any additional Purchase Payments. Any increase will
be added to your Annual Income Amount beginning on the day that the step-up is
effective or the Purchase Payment is made. A determination of whether you have
exceeded your Annual Income Amount is made at the time of each withdrawal;
therefore a subsequent increase in the Annual Income Amount will not offset
the effect of a withdrawal that exceeded the Annual Income Amount at the time
the withdrawal was made.
An optional automatic step-up ("Auto Step-Up") feature is available for this
benefit. This feature may be elected at the time the benefit is elected or at
any time while the benefit is in force. If you elect this feature, the first
Auto Step-Up opportunity will occur on the 1/st/ Annuity Anniversary that is
at least one year after the later of (1) the date of the first withdrawal
under the Spousal Lifetime Five benefit or (2) the most recent step-up. At
this time, your Annual Income Amount will be stepped-up if 5% of your Account
Value is greater than the Annual Income Amount by any amount. If 5% of the
Account Value does not exceed the Annual Income Amount, then an Auto Step-Up
opportunity will occur on each successive Annuity Anniversary until a step-up
occurs. Once a step-up occurs, the next Auto Step-Up opportunity will occur on
the 1/st/ Annuity Anniversary that is at least 1 year after the most recent
step-up. If, on the date that we implement an Auto Step-Up to your Annual
Income Amount, the charge for Spousal Lifetime Five has changed for new
purchasers, you may be subject to the new charge at the time of such step-up.
Subject to our rules and restrictions, you will still be permitted to manually
step-up the Annual Income Amount even if you elect the Auto Step-Up feature.
EXAMPLES OF WITHDRAWALS AND STEP-UP
The following examples of dollar-for-dollar and proportional reductions and
the step-up of the Annual Income Amount assume: 1.) the Issue Date and the
Effective Date of the Spousal Lifetime Five benefit are February 1, 2005; 2.)
an initial Purchase Payment of $250,000; 3.) the Account Value on February 1,
2006 is equal to $265,000; 4.) the first withdrawal occurs on March 1, 2006
when the Account Value is equal to $263,000; and 5.) the Account Value on
February 1, 2010 is equal to $280,000. The values set forth here are purely
hypothetical, and do not reflect the charge for the Spousal Lifetime Five or
any other fees and charges.
The initial Protected Withdrawal Value is calculated as the greatest of (a),
(b) and (c):
(a)Purchase payment accumulated at 5% per year from February 1, 2005 until
March 1, 2006 (393 days) = $250,000 X 1.05/(393/365)/ = $263,484.33
(b)Account Value on March 1, 2006 (the date of the first withdrawal) = $263,000
(c)Account Value on February 1, 2006 (the first Annuity Anniversary) = $265,000
Therefore, the initial Protected Withdrawal Value is equal to $265,000. The
Annual Income Amount is equal to $13,250 under the Spousal Life Income Benefit
(5% of $265,000).
EXAMPLE 1. DOLLAR-FOR-DOLLAR REDUCTION
If $10,000 was withdrawn (less than the Annual Income Amount) on March 1,
2006, then the following values would result:
.. Remaining Annual Income Amount for current Annuity Year = $13,250 - $10,000
= $3,250.
.. Annual Income Amount for future Annuity Years remains at $13,250
EXAMPLE 2. DOLLAR-FOR-DOLLAR AND PROPORTIONAL REDUCTIONS
If $15,000 was withdrawn (more than the Annual Income Amount) on March 1,
2006, then the following values would result:
.. Remaining Annual Income Amount for current Annuity Year = $0
.. Excess of withdrawal over the Annual Income Amount ($15,000 - $13,250 =
$1,750) reduces Annual Income Amount for future Annuity Years.
.. Reduction to Annual Income Amount = Excess Income/Account Value before
Excess Income X Annual Income Amount = $1,750/($263,000 - $13,250) X
$13,250 = $93. Annual Income Amount for future Annuity Years = $13,250 -
$93 = $13,157
EXAMPLE 3. STEP-UP OF THE ANNUAL INCOME AMOUNT
If a step-up of the Annual Income Amount is requested on February 1, 2010 or
the Auto Step-Up feature was elected, the step-up would occur because 5% of
the Account Value, which is $14,000 (5% of $280,000), is greater than the
Annual Income Amount of $13,250. The new Annual Income Amount will be equal to
$14,000.
BENEFITS UNDER THE SPOUSAL LIFETIME FIVE BENEFIT
To the extent that your Account Value was reduced to zero as a result of
cumulative withdrawals that are equal to or less than the Annual Income Amount
and amounts are still payable under the Spousal Life Income Benefit, we will
make an additional payment
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for that Annuity Year equal to the remaining Annual Income Amount for the
Annuity Year, if any. Thus, in that scenario, the remaining Annual Income
Amount would be payable even though your Account Value was reduced to zero. In
subsequent Annuity Years we make payments that equal the Annual Income Amount
as described in this Prospectus. No further Purchase Payments will be accepted
under your Annuity. We will make payments until the first of the Designated
Lives to die, and will continue to make payments until the death of the second
Designated Life as long as the Designated Lives were spouses at the time of
the first death. To the extent that cumulative withdrawals in the current
Annuity Year that reduced your Account Value to zero are more than the Annual
Income Amount, the Spousal Life Income Benefit terminates and no additional
payments will be made.
.. If annuity payments are to begin under the terms of your Annuity or if you
decide to begin receiving annuity payments and there is any Annual Income
Amount due in subsequent Annuity Years, you can elect one of the following
two options:
(1)apply your Account Value to any annuity option available; or
(2)request that, as of the date annuity payments are to begin, we make
annuity payments each year equal to the Annual Income Amount. We will
make payments until the first of the Designated Lives to die, and
will continue to make payments until the death of the second
Designated Life as long as the Designated Lives were spouses at the
time of the first death.
We must receive your request in a form acceptable to us at our office.
.. In the absence of an election when mandatory annuity payments are to begin,
we will make annual annuity payments as a joint and survivor or single (as
applicable) life fixed annuity with five payments certain using the same
basis that is used to calculate the greater of the annuity rates then
currently available or the annuity rates guaranteed in your Annuity. The
amount that will be applied to provide such annuity payments will be the
greater of:
(1)the present value of future Annual Income Amount payments. Such
present value will be calculated using the same basis that is used to
calculate the single life fixed annuity rates then currently
available or the single life fixed annuity rates guaranteed in your
Annuity; and
(2)the Account Value.
.. If no withdrawal was ever taken, we will determine an initial Protected
Withdrawal Value and calculate an Annual Income Amount as if you made your
first withdrawal on the date the annuity payments are to begin.
OTHER IMPORTANT CONSIDERATIONS
.. Withdrawals under the Spousal Lifetime Five benefit are subject to all of
the terms and conditions of the Annuity.
.. Withdrawals made while the Spousal Lifetime Five benefit is in effect will
be treated, for tax purposes, in the same way as any other withdrawals
under the Annuity. The Spousal Lifetime Five benefit does not directly
affect the Annuity's Account Value or Surrender Value, but any withdrawal
will decrease the Account Value by the amount of the withdrawal. If you
surrender your Annuity, you will receive the current Surrender Value, not
the Protected Withdrawal Value.
.. You can make withdrawals from your Annuity while your Account Value is
greater than zero without purchasing the Spousal Lifetime Five benefit. The
Spousal Lifetime Five benefit provides a guarantee that if your Account
Value declines due to market performance, you will be able to receive your
Annual Income Amount in the form of periodic benefit payments.
.. You should carefully consider when to begin taking withdrawals. If you
begin taking withdrawals early, you may maximize the time during which you
may take withdrawals due to longer life expectancy, and you will be using
an optional benefit for which you are paying a charge. On the other hand,
you could limit the value of the benefit if you begin taking withdrawals
too soon. For example, withdrawals reduce your Account Value and may limit
the potential for increasing your Protected Withdrawal Value. You should
discuss with your Financial Professional when it may be appropriate for you
to begin taking withdrawals.
.. In general, you must allocate your Account Value in accordance with the
then available investment option(s) that we may prescribe in order to
maintain the benefit. If, subsequent to your election of the benefit, we
change our requirements for how Account Value must be allocated under the
benefit, we will not compel you to re-allocate your Account Value in
accordance with our newly-adopted requirements. Subsequent to any change in
requirements, transfers of Account Value and allocation of additional
Purchase Payments may be subject to the new investment limitations.
.. There may be circumstances where you will continue to be charged the full
amount for the Spousal Lifetime Five benefit even when the benefit is only
providing a guarantee of income based on one life with no survivorship.
.. In order for the Surviving Designated Life to continue the Spousal Lifetime
Five benefit upon the death of an owner, the Designated Life must elect to
assume ownership of the Annuity under the spousal continuation option. When
the Annuity is owned by a Custodial Account, in order for Spousal Lifetime
Five to be continued after the death of the first Designated Life (the
Annuitant), the Custodial Account must elect to continue the Annuity and
the second Designated Life (the Contingent Annuitant) will be named as the
new Annuitant. See "Spousal Designations", and "Spousal Assumption of
Annuity" in this Prospectus.
.. You will begin paying the charge for this benefit as of the effective date
of the benefit, even if you do not begin taking withdrawals for many years,
or ever. We will not refund the charges you have paid if you choose never
to take any withdrawals and/or if you never receive any lifetime income
payments.
.. The Basic Death Benefit will terminate if withdrawals taken under the
Spousal Lifetime Five benefit cause your Account Value to reduce to zero.
Certain optional Death Benefits may terminate if withdrawals taken under
the Spousal Lifetime Five benefit cause your Account Value to reduce to
zero. (See "Death Benefit" for more information.)
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ELECTION OF AND DESIGNATIONS UNDER THE BENEFIT
We no longer permit elections of Spousal Lifetime Five - whether for those who
currently participate in Spousal Lifetime Five or for those who are buying an
Annuity for the first time. If you wish, you may cancel the Spousal Lifetime
Five benefit. You may then elect any other available living benefit on the
Valuation Day after have you cancelled the Spousal Lifetime Five benefit,
provided the request is received in good order (subject to state availability
and any applicable age requirements). Once the Spousal Lifetime Five benefit
is canceled you are not required to re-elect another optional living benefit
and any subsequent benefit election may be made on or after the first
Valuation Day following the cancellation of the Spousal Lifetime Five benefit
provided that the benefit you are looking to elect is available on a
post-issue basis. If you cancel the benefit, you lose all guarantees under the
benefit, and your guarantee under any new benefit you elect will be based on
your Account Value at that time.
Spousal Lifetime Five could only be elected based on two Designated Lives.
Designated Lives must be natural persons who are each other's spouses at the
time of election of the benefit and at the death of the first of the
Designated Lives to die. Spousal Lifetime Five only could be elected where the
Owner, Annuitant, and Beneficiary designations are as follows:
.. One Annuity Owner, where the Annuitant and the Owner are the same person
and the beneficiary is the Owner's spouse. The Owner/Annuitant and the
beneficiary each must be at least 55 years old at the time of election; or
.. Co-Annuity Owners, where the Owners are each other's spouses. The
beneficiary designation must be the surviving spouse, or the spouses named
equally. One of the owners must be the Annuitant. Each Owner must each be
at least 55 years old at the time of election; or
.. One Annuity Owner, where the Owner is a custodial account established to
hold retirement assets for the benefit of the Annuitant pursuant to the
provisions of Section 408(a) of the Internal Revenue Code (or any successor
Code section thereto) ("Custodial Account"), the beneficiary is the
Custodial Account, and the spouse of the Annuitant is the Contingent
Annuitant. Both the Annuitant and the Contingent Annuitant each must be at
least 55 years old at the time of election.
We do not permit a change of Owner under this benefit, except as follows:
(a)if one Owner dies and the surviving spousal Owner assumes the Annuity or
(b)if the Annuity initially is co-owned, but thereafter the Owner who is not
the Annuitant is removed as Owner. We permit changes of beneficiary under
this benefit. If the Designated Lives divorce, the Spousal Lifetime Five
benefit may not be divided as part of the divorce settlement or judgment.
Nor may the divorcing spouse who retains ownership of the Annuity appoint a
new Designated Life upon re-marriage.
TERMINATION OF THE BENEFIT
The benefit terminates automatically when your Annual Income Amount equals
zero. The benefit also terminates upon your surrender of the Annuity, upon the
first Designated Life to die if the Annuity is not continued, upon the second
Designated Life to die or upon your election to begin receiving annuity
payments. You may terminate the benefit at any time by notifying us. PLEASE
NOTE THAT IF YOU TERMINATE A LIVING BENEFIT SUCH AS SPOUSAL LIFETIME FIVE AND
ELECT A NEW LIVING BENEFIT, YOU LOSE THE GUARANTEES THAT YOU HAD ACCUMULATED
UNDER YOUR EXISTING BENEFIT AND WE WILL BASE ANY GUARANTEES UNDER THE NEW
BENEFIT ON YOUR ACCOUNT VALUE AS OF THE DATE THE NEW BENEFIT BECOMES ACTIVE.
WE RESERVE THE RIGHT TO WAIVE, CHANGE AND/OR FURTHER LIMIT THE ELECTION
FREQUENCY IN THE FUTURE.
The charge for the Spousal Lifetime Five benefit will no longer be deducted
from your Account Value upon termination of the benefit.
ADDITIONAL TAX CONSIDERATIONS
If you purchase an Annuity as an investment vehicle for "qualified"
investments, including an IRA, SEP-IRA, Tax Sheltered Annuity (or 403(b)) or
an employer plan under Code Section 401(a), the Required Minimum Distribution
rules under the Code provide that you begin receiving periodic amounts from
your Annuity beginning after age 70 1/2. For a Tax Sheltered Annuity or a
401(a) plan for which the participant is not a greater than 5 percent owner of
the employer, this required beginning date can generally be deferred to
retirement, if later. Roth IRAs are not subject to these rules during the
Owner's lifetime. The amount required under the Code may exceed the Annual
Income Amount, which will cause us to increase the Annual Income Amount in any
Annuity Year that Required Minimum Distributions due from your Annuity are
greater than such amounts. Any such payments will reduce your Protected
Withdrawal Value. In addition, the amount and duration of payments under the
annuity payment and Death Benefit provisions may be adjusted so that the
payments do not trigger any penalty or excise taxes due to tax considerations
such as Required Minimum Distribution provisions under the tax law.
As indicated, withdrawals made while this Benefit is in effect will be
treated, for tax purposes, in the same way as any other withdrawals under the
Annuity. Please see the Tax Considerations section of the prospectus for a
detailed discussion of the tax treatment of withdrawals. We do not address
each potential tax scenario that could arise with respect to this Benefit here.
HIGHEST DAILY LIFETIME FIVE INCOME BENEFIT (HD5)
The Highest Daily Lifetime Five benefit is no longer offered for new
elections. The income benefit under Highest Daily Lifetime Five currently is
based on a single "designated life" who is at least 55 years old on the date
that the benefit was acquired. The Highest Daily Lifetime Five Benefit was not
available if you elected any other optional living benefit, although you may
elect any
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optional death benefit. Any DCA program that transfers Account Value from a
Fixed Allocation is also not available as Fixed Allocations are not permitted
with the benefit. As long as your Highest Daily Lifetime Five Benefit is in
effect, you must allocate your Account Value in accordance with the
then-permitted and available investment option(s) with this benefit.
The benefit that guarantees until the death of the single designated life the
ability to withdraw an annual amount (the "Total Annual Income Amount") equal
to a percentage of an initial principal value (the "Total Protected Withdrawal
Value") regardless of the impact of Sub-account performance on the Account
Value, subject to our benefit rules regarding the timing and amount of
withdrawals. The benefit may be appropriate if you intend to make periodic
withdrawals from your Annuity, and wish to ensure that Sub-account performance
will not affect your ability to receive annual payments. You are not required
to make withdrawals as part of the benefit - the guarantees are not lost if
you withdraw less than the maximum allowable amount each year under the rules
of the benefit. As discussed below, we require that you participate in our
pre-determined mathematical formula in order to participate in Highest Daily
Lifetime Five, and in Appendix H to this Prospectus, we set forth the formula
under which we make the asset transfers. Withdrawals are taken first from your
own Account Value. We are only required to begin making lifetime income
payments to you under our guarantee when and if your Account Value is reduced
to zero (unless the benefit has terminated).
As discussed below, a key component of Highest Daily Lifetime Five is the
Total Protected Withdrawal Value, which is an amount that is distinct from
Account Value. Because each of the Total Protected Withdrawal Value and Total
Annual Income Amount is determined in a way that is not solely related to
Account Value, it is possible for Account Value to fall to zero, even though
the Total Annual Income Amount remains. You are guaranteed to be able to
withdraw the Total Annual Income Amount for the rest of your life, provided
that you have not made "excess withdrawals." Excess withdrawals, as discussed
below, will reduce your Total Annual Income Amount. Thus, you could experience
a scenario in which your Account Value was zero, and, due to your excess
withdrawals, your Total Annual Income Amount also was reduced to zero. In that
scenario, no further amount would be payable under Highest Daily Lifetime Five.
KEY FEATURE - TOTAL PROTECTED WITHDRAWAL VALUE
The Total Protected Withdrawal Value is used to determine the amount of the
annual payments under Highest Daily Lifetime Five. The Total Protected
Withdrawal Value is equal to the greater of the Protected Withdrawal Value and
any Enhanced Protected Withdrawal Value that may exist. We describe how we
determine Enhanced Protected Withdrawal Value, and when we begin to calculate
it, below. If you do not meet the conditions described below for obtaining
Enhanced Protected Withdrawal Value then Total Protected Withdrawal Value is
simply equal to Protected Withdrawal Value.
The Protected Withdrawal Value initially is equal to the Account Value on the
date that you elect Highest Daily Lifetime Five. On each Valuation Day
thereafter, until the earlier of the first withdrawal or ten years after the
date of your election of the benefit, we recalculate the Protected Withdrawal
Value. Specifically, on each such Valuation Day (the "Current Valuation Day"),
the Protected Withdrawal Value is equal to the greater of:
.. the Protected Withdrawal Value for the immediately preceding Valuation Day
(the "Prior Valuation Day"), appreciated at the daily equivalent of 5%
annually during the calendar day(s) between the Prior Valuation Day and the
Current Valuation Day (i.e., one day for successive Valuation Days, but
more than one calendar day for Valuation Days that are separated by
weekends and/or holidays), plus the amount of any Purchase Payment made on
the Current Valuation Day; and
.. the Account Value.
If you have not made a withdrawal prior to the tenth anniversary of the date
you elected Highest Daily Lifetime Five (which we refer to as the "Tenth
Anniversary"), we will continue to calculate a Protected Withdrawal Value. On
or after the Tenth Anniversary and up until the date of the first withdrawal,
your Protected Withdrawal Value is equal to the greater of the Protected
Withdrawal Value on the Tenth Anniversary or your Account Value.
The Enhanced Protected Withdrawal Value is only calculated if you do not take
a withdrawal prior to the Tenth Anniversary. Thus, if you do take a withdrawal
prior to the Tenth Anniversary, you are not eligible to receive Enhanced
Protected Withdrawal Value. If so, then on or after the Tenth Anniversary up
until the date of the first withdrawal, the Enhanced Protected Withdrawal
Value is equal to the sum of:
(a)200% of the Account Value on the date you elected Highest Daily Lifetime
Five;
(b)200% of all Purchase Payments made during the one-year period after the
date you elected Highest Daily Lifetime Five; and
(c)100% of all Purchase Payments made more than one year after the date you
elected Highest Daily Lifetime Five, but prior to the date of your first
withdrawal.
We cease these daily calculations of the Protected Withdrawal Value and
Enhanced Protected Withdrawal Value (and therefore, the Total Protected
Withdrawal Value) when you make your first withdrawal. However, as discussed
below, subsequent Purchase Payments will increase the Total Annual Income
Amount, while "excess" withdrawals (as described below) may decrease the Total
Annual Income Amount.
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KEY FEATURE - TOTAL ANNUAL INCOME AMOUNT UNDER THE HIGHEST DAILY LIFETIME FIVE
BENEFIT
The initial Total Annual Income Amount is equal to 5% of the Total Protected
Withdrawal Value at the first withdrawal taken after the benefit becomes
active and does not reduce in subsequent Annuity Years, as described below.
For purposes of the mathematical formula described below, we also calculate a
Highest Daily Annual Income Amount, which is initially equal to 5% of the
Protected Withdrawal Value.
Under the Highest Daily Lifetime Five benefit, if your cumulative withdrawals
in an Annuity Year are less than or equal to the Total Annual Income Amount,
they will not reduce your Total Annual Income Amount in subsequent Annuity
Years, but any such withdrawals will reduce the Total Annual Income Amount on
a dollar-for-dollar basis in that Annuity Year. If your cumulative withdrawals
are in excess of the Total Annual Income Amount ("Excess Income"), your Total
Annual Income Amount in subsequent years will be reduced (except with regard
to required minimum distributions) by the result of the ratio of the Excess
Income to the Account Value immediately prior to such withdrawal (see examples
of this calculation below). Reductions include the actual amount of the
withdrawal.
Any Purchase Payment that you make will increase the then-existing Total
Annual Income Amount and Highest Daily Annual Income Amount by an amount equal
to 5% of the Purchase Payment.
If your Annuity permits additional purchase payments, we may limit any
additional purchase payment(s) if we determine that as a result of the timing
and amounts of your additional purchase payments and withdrawals, the Annual
Income Amount is being increased in an unintended fashion. Among the factors
we will use in making a determination as to whether an action is designed to
increase the Annual Income Amount in an unintended fashion is the relative
size of additional purchase payment(s). Subject to state law, we reserve the
right to not accept additional purchase payments if we are not then offering
this benefit for new elections. We will exercise such reservation of right for
all annuity purchasers in the same class in a nondiscriminatory manner.
An automatic step-up feature ("Highest Quarterly Auto Step-Up") is included as
part of this benefit. As detailed in this paragraph, the Highest Quarterly
Auto Step-Up feature can result in a larger Total Annual Income Amount if your
Account Value increases subsequent to your first withdrawal. We begin
examining the Account Value for purposes of this feature starting with the
anniversary of the Issue Date of the Annuity (the "Annuity Anniversary")
immediately after your first withdrawal under the benefit. Specifically, upon
the first such Annuity Anniversary, we identify the Account Value on the
Valuation Days corresponding to the end of each quarter that (i) is based on
your Annuity Year, rather than a calendar year; (ii) is subsequent to the
first withdrawal; and (iii) falls within the immediately preceding Annuity
Year. If the end of any such quarter falls on a holiday or a weekend, we use
the next Valuation Day. We multiply each of those quarterly Account Values by
5%, adjust each such quarterly value for subsequent withdrawals and Purchase
Payments, and then select the highest of those values. If the highest of those
values exceeds the existing Total Annual Income Amount, we replace the
existing amount with the new, higher amount. Otherwise, we leave the existing
Total Annual Income Amount intact. In later years, (i.e., after the first
Annuity Anniversary after the first withdrawal) we determine whether an
automatic step-up should occur on each Annuity Anniversary, by performing a
similar examination of the Account Values on the end of the four immediately
preceding quarters. If, on the date that we implement a Highest Quarterly Auto
Step-Up to your Total Annual Income Amount, the charge for Highest Daily
Lifetime Five has changed for new purchasers, you may be subject to the new
charge at the time of such step-up. Prior to increasing your charge for
Highest Daily Lifetime Five upon a step-up, we would notify you, and give you
the opportunity to cancel the automatic step-up feature. If you receive notice
of a proposed step-up and accompanying fee increase, you should carefully
evaluate whether the amount of the step-up justifies the increased fee to
which you will be subject.
The Highest Daily Lifetime Five benefit does not affect your ability to make
withdrawals under your annuity, or limit your ability to request withdrawals
that exceed the Total Annual Income Amount. Under Highest Daily Lifetime Five,
if your cumulative withdrawals in an Annuity Year are less than or equal to
the Total Annual Income Amount, they will not reduce your Total Annual Income
Amount in subsequent Annuity Years, but any such withdrawals will reduce the
Total Annual Income Amount on a dollar-for-dollar basis in that Annuity Year.
If, cumulatively, you withdraw an amount less than the Total Annual Income
Amount in any Annuity Year, you cannot carry-over the unused portion of the
Total Annual Income Amount to subsequent Annuity Years.
Examples of dollar-for-dollar and proportional reductions, and the Highest
Quarterly Auto Step-Up are set forth below. The values depicted here are
purely hypothetical, and do not reflect the charges for the Highest Daily
Lifetime Five benefit or any other fees and charges. Assume the following for
all three examples:
. The Issue Date is December 1, 2006.
. The Highest Daily Lifetime Five benefit is elected on March 5, 2007.
DOLLAR-FOR-DOLLAR REDUCTIONS
On May 2, 2007, the Total Protected Withdrawal Value is $120,000, resulting in
a Total Annual Income Amount of $6,000 (5% of $120,000). Assuming $2,500 is
withdrawn from the Annuity on this date, the remaining Total Annual Income
Amount for that Annuity Year (up to and including December 1, 2007) is $3,500.
This is the result of a dollar-for-dollar reduction of the Total Annual Income
Amount - $6,000 less $2,500 = $3,500.
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PROPORTIONAL REDUCTIONS
Continuing the previous example, assume an additional withdrawal of $5,000
occurs on August 6, 2007 and the Account Value at the time of this withdrawal
is $110,000. The first $3,500 of this withdrawal reduces the Total Annual
Income Amount for that Annuity Year to $0. The remaining withdrawal amount -
$1,500 - reduces the Total Annual Income Amount in future Annuity Years on a
proportional basis based on the ratio of the excess withdrawal to the Account
Value immediately prior to the excess withdrawal. (Note that if there were
other withdrawals in that Annuity Year, each would result in another
proportional reduction to the Total Annual Income Amount).
HERE IS THE CALCULATION:
Account Value before withdrawal $110,000.00
Less amount of "non" excess withdrawal $ 3,500.00
Account Value immediately before excess withdrawal of $1,500 $106,500.00
Excess withdrawal amount $ 1,500.00
Divided by Account Value immediately before excess withdrawal $106,500.00
Ratio 1.41%
Total Annual Income Amount $ 6,000.00
Less ratio of 1.41% $ 84.51
Total Annual Income Amount for future Annuity Years $ 5,915.49
HIGHEST QUARTERLY AUTO STEP-UP
On each Annuity Anniversary date, the Total Annual Income Amount is stepped-up
if 5% of the highest quarterly value since your first withdrawal (or last
Annuity Anniversary in subsequent years), adjusted for withdrawals and
additional Purchase Payments, is higher than the Total Annual Income Amount,
adjusted for excess withdrawals and additional Purchase Payments.
Continuing the same example as above, the Total Annual Income Amount for this
Annuity Year is $6,000. However, the excess withdrawal on August 6 reduces
this amount to $5,915.49 for future years (see above). For the next Annuity
Year, the Total Annual Income Amount will be stepped-up if 5% of the highest
quarterly Account Value, adjusted for withdrawals, is higher than $5,915.49.
Here are the calculations for determining the quarterly values. Only the
June 1 value is being adjusted for excess withdrawals as the September 1 and
December 1 Valuation Days occur after the excess withdrawal on August 6.
HIGHEST QUARTERLY VALUE
(ADJUSTED WITH ADJUSTED TOTAL ANNUAL
WITHDRAWAL AND PURCHASE INCOME AMOUNT (5% OF THE
DATE* ACCOUNT VALUE PAYMENTS)** HIGHEST QUARTERLY VALUE)
----- ------------- ----------------------- ------------------------
June 1, 2007 $118,000.00 $118,000.00 $5,900.00
August 6, 2007 $110,000.00 $112,885.55 $5,644.28
September 1, 2007 $112,000.00 $112,885.55 $5,644.28
December 1, 2007 $119,000.00 $119,000.00 $5,950.00
* In this example, the Annuity Anniversary date is December 1. The quarterly
valuation dates are every three months thereafter -
March 1, June 1, September 1, and December 1. In this example, we do not
use the March 1 date as the first withdrawal took place after March 1. The
Annuity Anniversary Date of December 1 is considered the fourth and final
quarterly valuation date for the year.
** In this example, the first quarterly value after the first withdrawal is
$118,000 on June 1, yielding an adjusted Total Annual Income Amount of
$5,900.00. This amount is adjusted on August 6 to reflect the $5,000
withdrawal. The calculations for the adjustments are:
. The Account Value of $118,000 on June 1 is first reduced
dollar-for-dollar by $3,500 ($3,500 is the remaining Total Annual Income
Amount for the Annuity Year), resulting in an adjusted Account Value of
$114,500 before the excess withdrawal.
. This amount ($114,500) is further reduced by 1.41% (this is the ratio in
the above example which is the excess withdrawal divided by the Account
Value immediately preceding the excess withdrawal) resulting in a
Highest Quarterly Value of $112,885.55.
The adjusted Total Annual Income Amount is carried forward to the next
quarterly anniversary date of September 1. At this time, we compare this
amount to 5% of the Account Value on September 1. Since the June 1 adjusted
Total Annual Income Amount of $5,644.28 is higher than $5,600.00 (5% of
$112,000), we continue to carry $5,644.28 forward to the next and final
quarterly anniversary date of December 1. The Account Value on December 1 is
$119,000 and 5% of this amount is $5,950. Since this is higher than $5,644.28,
the adjusted Total Annual Income Amount is reset to $5,950.00.
In this example, 5% of the December 1 value yields the highest amount of $
5,950.00. Since this amount is higher than the current year's Total Annual
Income Amount of $5,915.49 adjusted for excess withdrawals, the Total Annual
Income Amount for the next Annuity Year, starting on December 2, 2007 and
continuing through December 1, 2008, will be stepped-up to $5,950.00.
BENEFITS UNDER THE HIGHEST DAILY LIFETIME FIVE BENEFIT
.. To the extent that your Account Value was reduced to zero as a result of
cumulative withdrawals that are equal to or less than the Total Annual
Income Amount and amounts are still payable under Highest Daily Lifetime
Five, we will make an additional
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payment, if any, for that Annuity Year equal to the remaining Total Annual
Income Amount for the Annuity Year. Thus, in that scenario, the remaining
Total Annual Income Amount would be payable even though your Account Value
was reduced to zero. In subsequent Annuity Years we make payments that
equal the Total Annual Income Amount as described in this section. We will
make payments until the death of the single designated life. To the extent
that cumulative withdrawals in the current Annuity Year that reduced your
Account Value to zero are more than the Total Annual Income Amount, the
Highest Daily Lifetime Five benefit terminates, and no additional payments
will be made.
.. If Annuity payments are to begin under the terms of your Annuity, or if you
decide to begin receiving Annuity payments and there is a Total Annual
Income Amount due in subsequent Annuity Years, you can elect one of the
following two options:
(1)apply your Account Value to any Annuity option available; or
(2)request that, as of the date Annuity payments are to begin, we make
Annuity payments each year equal to the Total Annual Income Amount.
We will make payments until the death of the single designated life.
We must receive your request in a form acceptable to us at our office.
.. In the absence of an election when mandatory annuity payments are to begin,
we will make annual annuity payments in the form of a single life fixed
annuity with ten payments certain, by applying the greater of the annuity
rates then currently available or the annuity rates guaranteed in your
Annuity. The amount that will be applied to provide such Annuity payments
will be the greater of:
(1)the present value of the future Total Annual Income Amount payments.
Such present value will be calculated using the greater of the single
life fixed annuity rates then currently available or the single life
fixed annuity rates guaranteed in your Annuity; and
(2)the Account Value.
.. If no withdrawal was ever taken, we will calculate the Total Annual Income
Amount as if you made your first withdrawal on the date the annuity
payments are to begin.
.. Please note that if your Annuity has a maximum Annuity Date requirement,
payments that we make under this benefit as of that date will be treated as
annuity payments.
OTHER IMPORTANT CONSIDERATIONS
.. Withdrawals under the Highest Daily Lifetime Five benefit are subject to
all of the terms and conditions of the Annuity.
.. Withdrawals made while the Highest Daily Lifetime Five Benefit is in effect
will be treated, for tax purposes, in the same way as any other withdrawals
under the Annuity. The Highest Daily Lifetime Five Benefit does not
directly affect the Account Value or surrender value, but any withdrawal
will decrease the Account Value by the amount of the withdrawal. If you
surrender your Annuity you will receive the current surrender value.
.. You can make withdrawals from your Annuity while your Account Value is
greater than zero without purchasing the Highest Daily Lifetime Five
benefit. The Highest Daily Lifetime Five benefit provides a guarantee that
if your Account Value declines due to market performance, you will be able
to receive your Total Annual Income Amount in the form of periodic
benefit payments.
.. You should carefully consider when to begin taking withdrawals. If you
begin taking withdrawals early, you may maximize the time during which you
may take withdrawals due to longer life expectancy, and you will be using
an optional benefit for which you are paying a charge. On the other hand,
you could limit the value of the benefit if you begin taking withdrawals
too soon. For example, withdrawals reduce your Account Value and may limit
the potential for increasing your Protected Withdrawal Value. You should
discuss with your Financial Professional when it may be appropriate for you
to begin taking withdrawals.
.. Upon inception of the benefit and to maintain the benefit, 100% of your
Account Value must have been allocated to the Permitted Sub-accounts.
However, the formula component of the benefit as described below may
transfer Account Value to the Benefit Fixed Rate Account as of the
effective date of the benefit in some circumstances.
.. You cannot allocate Purchase Payments or transfer Account Value to or from
a Fixed Allocation if you elect this benefit.
.. Transfers to and from the Sub-accounts and the Benefit Fixed Rate Account
triggered by the formula component of the benefit will not count toward the
maximum number of free transfers allowable under an Annuity.
.. In general, you must allocate your Account Value in accordance with the
then available investment option(s) that we may prescribe in order to
maintain the Highest Daily Lifetime Five benefit. If, subsequent to your
election of the benefit, we change our requirements for how Account Value
must be allocated under the benefit, we will not compel you to re-allocate
your Account Value in accordance with our newly-adopted requirements.
Subsequent to any change in requirements, transfers of Account Value and
allocation of additional Purchase Payments may be subject to the new
investment limitations.
.. The charge for Highest Daily Lifetime Five is 0.60% annually, assessed
against the average daily net assets of the Sub-accounts. This charge is in
addition to any other fees under the annuity. You will begin paying the
charge for this benefit as of the effective date of the benefit, even if
you do not begin taking withdrawals for many years, or ever. We will not
refund the charges you have paid if you choose never to take any
withdrawals and/or if you never receive any lifetime income payments. Also,
the cost to us of providing the benefit is a factor, among many, that we
consider when determining the interest rate credited under the Benefit
Fixed Rate Account, and therefore, we credit lower interest rates due to
this factor than we otherwise would.
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.. The basic Death Benefit will terminate if withdrawals taken under the
Highest Daily Lifetime Five benefit cause your Account Value to reduce to
zero. Certain optional Death Benefits may terminate if withdrawals taken
under the Highest Daily Lifetime Five benefit cause your Account Value to
reduce to zero. (See "Death Benefit" for more information.)
Highest Daily Lifetime Five is no longer available for new elections.
ELECTION OF AND DESIGNATIONS UNDER THE BENEFIT
For Highest Daily Lifetime Five, there must be either a single Owner who is
the same as the Annuitant, or if the Annuity is entity-owned, there must be a
single natural person Annuitant. In either case, the Annuitant must be at
least 55 years old.
Any change of the Annuitant under the Annuity will result in cancellation of
Highest Daily Lifetime Five. Similarly, any change of Owner will result in
cancellation of Highest Daily Lifetime Five, except if (a) the new Owner has
the same taxpayer identification number as the previous owner (b) both the new
Owner and previous Owner are entities or (c) the previous Owner is a natural
person and the new Owner is an entity.
We no longer permit elections of Highest Daily Lifetime Five. If you wish, you
may cancel the Highest Daily Lifetime Five benefit. You may then elect any
other available living benefit on the Valuation Day after you have cancelled
the Highest Daily Lifetime Five benefit, provided the request is received in
good order (subject to state availability and any applicable age
requirements). Upon cancellation of the Highest Daily Lifetime Five benefit,
any Account Value allocated to the Benefit Fixed Rate Account used with the
formula will be reallocated to the Permitted Sub-Accounts according to your
most recent allocation instructions or, in absence of such instructions,
pro-rata. ONCE THE HIGHEST DAILY LIFETIME FIVE BENEFIT IS CANCELED YOU ARE NOT
REQUIRED TO RE-ELECT ANOTHER OPTIONAL LIVING BENEFIT AND ANY SUBSEQUENT
BENEFIT ELECTION MAY BE MADE ON OR AFTER THE FIRST VALUATION DAY FOLLOWING THE
CANCELLATION OF THE HIGHEST DAILY LIFETIME FIVE BENEFIT PROVIDED THAT THE
BENEFIT YOU ARE LOOKING TO ELECT IS AVAILABLE ON A POST-ISSUE BASIS. IF YOU
CANCEL THE BENEFIT, YOU LOSE ALL GUARANTEES UNDER THE BENEFIT, AND YOUR
GUARANTEE UNDER ANY NEW BENEFIT YOU ELECT WILL BE BASED ON YOUR ACCOUNT VALUE
AT THAT TIME. ANY SUCH NEW BENEFIT MAY BE MORE EXPENSIVE.
TERMINATION OF THE BENEFIT
You may terminate the benefit at any time by notifying us. If you terminate
the benefit, any guarantee provided by the benefit will terminate as of the
date the termination is effective, and certain restrictions on re-election
will apply as described above. The benefit terminates: (i) upon your
termination of the benefit (ii) upon your surrender of the Annuity (iii) upon
your election to begin receiving annuity payments (iv) upon the death of the
Annuitant (v) if both the Account Value and Total Annual Income Amount equal
zero or (vi) if you fail to meet our requirements for issuing the benefit. If
you terminate the benefit, you will lose the Protected Withdrawal Value,
Annual Income Amount, as well as any Enhanced Protected Withdrawal Value and
Return of Principal Guarantees.
Upon termination of Highest Daily Lifetime Five, we cease deducting the charge
for the benefit. With regard to your investment allocations, upon termination
we will: (i) leave intact amounts that are held in the variable investment
options, and (ii) transfer all amounts held in the Benefit Fixed Rate Account
(as defined below) to your variable investment options, based on your existing
allocation instructions or (in the absence of such existing instructions) pro
rata (i.e. in the same proportion as the current balances in your variable
investment options). Upon termination, we may limit or prohibit investment in
the Fixed Allocations.
RETURN OF PRINCIPAL GUARANTEE
If you have not made a withdrawal before the Tenth Anniversary, we will
increase your Account Value on that Tenth Anniversary (or the next Valuation
Day, if that anniversary is not a Valuation Day), if the requirements set
forth in this paragraph are met. On the Tenth Anniversary, we add:
(a)your Account Value on the day that you elected Highest Daily Lifetime Five;
and
(b)the sum of each Purchase Payment you made during the one-year period after
you elected the benefit.
If the sum of (a) and (b) is greater than your Account Value on the Tenth
Anniversary, we increase your Account Value to equal the sum of (a) and (b),
by contributing funds from our general account. If the sum of (a) and (b) is
less than or equal to your Account Value on the Tenth Anniversary, we make no
such adjustment. The amount that we add to your Account Value under this
provision will be allocated to each of our variable investment options and the
Benefit Fixed Rate Account (described below), in the same proportion that each
such investment option bears to your total Account Value, immediately prior to
the application of the amount. Any such amount will not be considered a
Purchase Payment when calculating your Total Protected Withdrawal Value, your
death benefit, or the amount of any other or optional benefit that you may
have selected, and therefore will have no direct impact on any such values at
the time we add this amount. This potential addition to Account Value is
available only if you have elected Highest Daily Lifetime Five and if you meet
the conditions set forth in this paragraph. Thus, if you take a withdrawal
prior to the Tenth Anniversary, you are not eligible to receive the Return of
Principal Guarantee.
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MATHEMATICAL FORMULA COMPONENT OF HIGHEST DAILY LIFETIME FIVE
As indicated above, we limit the sub-accounts to which you may allocate
Account Value if you have elected Highest Daily Lifetime Five. For purposes of
this benefit, we refer to those permitted sub-accounts as the "Permitted
Sub-accounts". As a requirement of participating in Highest Daily Lifetime
Five, we require that you participate in our mathematical formula under which
we may transfer Account Value between the Permitted Sub-accounts and a fixed
interest rate account that is part of our general account (the "Benefit Fixed
Rate Account"). This required formula helps us manage our financial exposure
under the benefit, by moving assets to a more stable option (i.e., the Benefit
Fixed Rate Account). We determine whether to make a transfer, and the amount
of any transfer, under a non-discretionary formula, discussed below. The
Benefit Fixed Rate Account is available only with this benefit, and thus you
may not allocate purchase payments to or transfer Account Value to or from the
Benefit Fixed Rate Account. The interest rate that we pay with respect to the
Benefit Fixed Rate Account is reduced by an amount that corresponds generally
to the charge that we assess against your variable Sub-accounts for Highest
Daily Lifetime Five. The Benefit Fixed Rate Account is not subject to the
Investment Company Act of 1940 or the Securities Act of 1933.
Under the formula component of Highest Daily Lifetime Five, we monitor your
Account Value daily and, if necessary, systematically transfer amounts between
the Permitted Sub-accounts you have chosen and the Benefit Fixed Rate Account.
Any transfer would be made in accordance with the formula, which is set forth
in the schedule supplement to the endorsement for this benefit (and also
appears in Appendix H to this prospectus). Speaking generally, the formula,
which we apply each Valuation Day, operates as follows. The formula starts by
identifying your Protected Withdrawal Value for that day and then multiplies
that figure by 5%, to produce a projected (i.e., hypothetical) Highest Daily
Annual Income Amount. Then, using our actuarial tables, we produce an estimate
of the total amount we would target in our allocation model, based on the
projected Highest Daily Annual Income Amount each year for the rest of your
life. In the formula, we refer to that value as the "Target Value" or "L". If
you have already made a withdrawal, your projected Annual Income Amount (and
thus your Target Value) would take into account any automatic step-up that was
scheduled to occur according to the step-up formula described above. Next, the
formula subtracts from the Target Value the amount held within the Benefit
Fixed Rate Account on that day, and divides that difference by the amount held
within the Permitted Sub-accounts. That ratio, which essentially isolates the
amount of your Target Value that is not offset by amounts held within the
Benefit Fixed Rate Account, is called the "Target Ratio" or "r". If the Target
Ratio exceeds a certain percentage (currently 83%) it means essentially that
too much Target Value is not offset by assets within the Benefit Fixed Rate
Account, and therefore we will transfer an amount from your Permitted
Sub-accounts to the Benefit Fixed Rate Account. Conversely, if the Target
Ratio falls below a certain percentage (currently 77%), then a transfer from
the Benefit Fixed Rate Account to the Permitted Sub-accounts would occur. Note
that the formula is calculated with reference to the Highest Daily Annual
Income Amount, rather than with reference to the Annual Income Amount. If you
select the new mathematical formula, see the discussion regarding the 90% cap.
As you can glean from the formula, poor investment performance of your Account
Value may result in a transfer of a portion of your variable Account Value to
the Benefit Fixed Rate Account, because such poor investment performance will
tend to increase the Target Ratio. Moreover, "flat" investment returns of your
Account Value over a period of time also could result in the transfer of your
Account Value to the Benefit Fixed Rate Account. Because the amount allocated
to the Benefit Fixed Rate Account and the amount allocated to the Permitted
Sub-accounts each is a variable in the formula, the investment performance of
each affects whether a transfer occurs for your Annuity. In deciding how much
to transfer, we use another formula, which essentially seeks to re-balance
amounts held in the Permitted Sub-accounts and the Benefit Fixed Rate Account
so that the Target Ratio meets a target, which currently is equal to 80%. Once
elected, the ratios we use will be fixed.
While you are not notified when the formula dictates a transfer, you will
receive a confirmation statement indicating the transfer of a portion of your
Account Value either to or from the Benefit Fixed Rate Account. The formula is
designed primarily to mitigate the financial risks that we incur in providing
the guarantee under Highest Daily Lifetime Five.
Depending on the results of the formula calculation we may, on any day:
.. Not make any transfer between the Permitted Sub-accounts and the Benefit
Fixed Rate Account; or
.. If a portion of your Account Value was previously allocated to the Benefit
Fixed Rate Account, transfer all or a portion of those amounts to the
Permitted Sub-accounts, based on your existing allocation instructions or
(in the absence of such existing instructions) pro rata (i.e., in the same
proportion as the current balances in your variable investment options).
Amounts taken out of the Benefit Fixed Rate Account will be withdrawn for
this purpose on a last-in, first-out basis (an amount renewed into a new
guarantee period under the Benefit Fixed Rate Account will be deemed a new
investment for purposes of this last-in, first-out rule); or
.. Transfer all or a portion of your Account Value in the Permitted
Sub-accounts pro-rata to the Benefit Fixed Rate Account. The interest that
you earn on such transferred amount will be equal to the annual rate that
we have set for that day, and we will credit the daily equivalent of that
annual interest until the earlier of one year from the date of the transfer
or the date that such amount in the Benefit Fixed Rate Account is
transferred back to the Permitted Sub-accounts.
Therefore, at any given time, some, none, or all of your Account Value may be
allocated to the Benefit Fixed Rate Account. If your entire Account Value is
transferred to the Benefit Fixed Rate Account, then based on the way the
formula operates, the formula
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will not transfer amounts out of the Benefit Fixed Rate Account to the
Permitted Sub-accounts and the entire Account Value would remain in the
Benefit Rate Fixed Account. If you make additional purchase payments to your
Annuity, they will be allocated to the Sub-accounts according to your
allocation instructions. Such additional purchase payments may or may not
cause the formula to transfer money in or out of the Benefit Fixed Rate
Account. Once the purchase payments are allocated to your Annuity, they will
also be subject to the formula, which may result in immediate transfers to or
from the Benefit Fixed Rate Account, if dictated by the formula. The amounts
of any such transfer will vary, as dictated by the formula, and will depend on
the factors listed below.
Prior to the first withdrawal, the primary driver of transfers to the Benefit
Fixed Rate Account is the difference between your Account Value and your Total
Protected Withdrawal Value. If none of your Account Value is allocated to the
Benefit Fixed Rate Account, then over time the formula permits an increasing
difference between the Account Value and the Total Protected Withdrawal Value
before a transfer to the Benefit Fixed Rate Account occurs. Therefore, as time
goes on, while none of your Account Value is allocated to the Benefit Fixed
Rate Account, the smaller the difference between the Total Protected
Withdrawal Value and the Account Value, the more the Account Value can
decrease prior to a transfer to the Benefit Fixed Rate Account.
Each market cycle is unique, therefore the performance of your Sub-accounts
and the Benefit Fixed Rate Account, and their impact on your Account Value,
will differ from market cycle to market cycle producing different transfer
activity under the formula. The amount and timing of transfers to and from the
Benefit Fixed Rate Account pursuant to the formula depend on various factors
unique to your Annuity and are not necessarily directly correlated with the
securities markets, bond markets, interest rates or any other market or index.
Some of the factors that determine the amount and timing of transfers (as
applicable to your Annuity), include:
.. The difference between your Account Value and your Total Protected
Withdrawal Value;
.. The amount of time Highest Daily Lifetime Five has been in effect on your
Annuity;
.. The amount allocated to and the performance of the Permitted Sub-accounts
and the Benefit Fixed Rate Account;
.. Any additional Purchase Payments you make to your Annuity (while the
benefit is in effect); and
.. Any withdrawals you take from your Annuity (while the benefit is in effect).
Because the amount allocated to the Benefit Fixed Rate Account and the amount
allocated to the Permitted Sub-accounts each is a variable in the formula, the
investment performance of each affects whether a transfer occurs for your
Annuity. The greater the amounts allocated to either the Benefit Fixed Rate
Account or to the Permitted Sub-accounts, the greater the impact performance
of those investments have on your Account Value and thus the greater the
impact on whether (and how much) your Account Value is transferred to or from
the Benefit Fixed Rate Account. It is possible, under the formula, that if a
significant portion of your Account Value is allocated to the Benefit Fixed
Rate Account and it has positive performance, the formula might transfer a
portion of your Account Value to the Permitted Sub-accounts, even if the
performance of your Permitted Sub-accounts is negative. Conversely, if a
significant portion of your Account Value is allocated to the Benefit Fixed
Rate Account and it has negative performance, the formula may transfer
additional amounts from your Permitted Sub-accounts to the Benefit Fixed Rate
Account even if the performance of your Permitted Sub-accounts is positive.
Any Account Value in the Benefit Fixed Rate Account will not participate in
the positive or negative investment experience of the Permitted Sub-accounts
until it is transferred out of the Benefit Fixed Rate Account.
ADDITIONAL TAX CONSIDERATIONS
If you purchase an annuity as an investment vehicle for "qualified"
investments, including an IRA, SEP-IRA, Tax Sheltered Annuity (or 403(b)) or
employer plan under Code Section 401(a), the Required Minimum Distribution
rules under the Code provide that you begin receiving periodic amounts from
your annuity beginning after age 70 1/2. For a Tax Sheltered Annuity or a
401(a) plan for which the participant is not a greater than 5 percent owner of
the employer, this required beginning date can generally be deferred to
retirement, if later. Roth IRAs are not subject to these rules during the
owner's lifetime. The amount required under the Code may exceed the Total
Annual Income Amount, which will cause us to increase the Total Annual Income
Amount in any Annuity Year that Required Minimum Distributions due from your
Annuity that are greater than such amounts. In addition, the amount and
duration of payments under the annuity payment and death benefit provisions
may be adjusted so that the payments do not trigger any penalty or excise
taxes due to tax considerations such as Required Minimum Distribution
provisions under the tax law. Please note, however, that any withdrawal you
take prior to the Tenth Anniversary, even if withdrawn to satisfy required
minimum distribution rules, will cause you to lose the ability to receive
Enhanced Protected Withdrawal Value and an amount under the Return of
Principal Guarantee.
As indicated, withdrawals made while this Benefit is in effect will be
treated, for tax purposes, in the same way as any other withdrawals under the
Annuity. Please see the Tax Considerations section of the prospectus for a
detailed discussion of the tax treatment of withdrawals. We do not address
each potential tax scenario that could arise with respect to this Benefit
here. However, we do note that if you participate in Highest Daily Lifetime
Five through a non-qualified annuity, and your annuity has received Enhanced
Protected Withdrawal Value and/or an additional amount under the Return of
Principal Guarantee, as with all withdrawals, once all Purchase Payments are
returned under the Annuity, all subsequent withdrawal amounts will be taxed as
ordinary income.
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OPTIONAL 90% CAP FEATURE FOR THE FORMULA UNDER HIGHEST DAILY LIFETIME FIVE.
If you currently own an Annuity and have elected the Highest Daily Lifetime
Five Income Benefit, you can elect this feature which utilizes a new
mathematical formula. The new formula is described below and will (if you
elect it) replace the "Transfer Calculation" portion of the mathematical
formula currently used in connection with your benefit on a prospective basis.
There is no cost to adding this feature to your Annuity. This election may
only be made once and may not be revoked once elected. This feature is
available subject to state approval. The new formula is found in Appendix H
(page H-2). Only the election of the 90% Cap will prevent all of your Account
Value from being allocated to the Benefit Fixed Rate Account. If all of your
Account Value is currently allocated to the Benefit Fixed Rate Account, it
will not transfer back to the Permitted Sub-accounts unless you elect the 90%
Cap feature. If you make additional Purchase Payments, they may or may not
result in a transfer to or from the Benefit Fixed Rate Account.
Under the new formula, the formula will not execute a transfer to the Benefit
Fixed Rate Account that results in more than 90% of your Account Value being
allocated to the Benefit Fixed Rate Account ("90% cap" or "90% cap rule").
Thus, on any Valuation Day, if the formula would require a transfer into the
Benefit Fixed Rate Account that would result in more than 90% of the Account
Value being allocated to the Benefit Fixed Rate Account, only the amount that
results in exactly 90% of the Account Value being allocated to the Benefit
Fixed Rate Account will be transferred. Additionally, future transfers into
the Benefit Fixed Rate Account will not be made (regardless of the performance
of the Benefit Fixed Rate Account and the Permitted Sub-accounts) at least
until there is first a transfer out of the Benefit Fixed Rate Account. Once
this transfer occurs out of the Benefit Fixed Rate Account, future amounts may
be transferred to or from the Benefit Fixed Rate Account if dictated by the
formula (subject to the 90% cap). At no time will the formula make a transfer
to the Benefit Fixed Rate Account that results in greater than 90% of your
Account Value being allocated to the Benefit Fixed Rate Account. HOWEVER, IT
IS POSSIBLE THAT, DUE TO THE INVESTMENT PERFORMANCE OF YOUR ALLOCATIONS IN THE
BENEFIT FIXED RATE ACCOUNT AND YOUR ALLOCATIONS IN THE PERMITTED SUB-ACCOUNTS
YOU HAVE SELECTED, YOUR ACCOUNT VALUE COULD BE MORE THAN 90% INVESTED IN THE
BENEFIT FIXED RATE ACCOUNT.
If you make additional purchase payments to your Annuity while the 90% cap is
in effect, the formula will not transfer any of such additional purchase
payments to the Benefit Fixed Rate Account at least until there is first a
transfer out of the Benefit Fixed Rate Account, regardless of how much of your
Account Value is in the Permitted Sub-accounts. This means that there could be
scenarios under which, because of the additional purchase payments you make,
less than 90% of your entire Account Value is allocated to the Benefit Fixed
Rate Account, and the formula will still not transfer any of your Account
Value to the Benefit Fixed Rate Account (at least until there is first a
transfer out of the Benefit Fixed Rate Account). For example:
.. March 19, 2009 - a transfer is made to the Benefit Fixed Rate Account that
results in the 90% cap being met and now $90,000 is allocated to the
Benefit Fixed Rate Account and $10,000 is allocated to the Permitted
Sub-accounts.
.. March 20, 2009 - you make an additional purchase payment of $10,000. No
transfers have been made from the Benefit Fixed Rate Account to the
Permitted Sub-accounts since the cap went into effect on March 19, 2009.
.. As of March 20, 2009 (and at least until first a transfer is made out of
the Benefit Fixed Rate Account under the formula) - the $10,000 payment is
allocated to the Permitted Sub-accounts and now you have 82% in the Benefit
Fixed Rate Account and 18% in the Permitted Sub-accounts (such that $20,000
is allocated to the Permitted Sub-accounts and $90,000 is allocated to the
Benefit Fixed Rate Account).
.. Once there is a transfer out of the Benefit Fixed Rate Account (of any
amount), the formula will operate as described above, meaning that the
formula could transfer amounts to or from the Benefit Fixed Rate Account if
dictated by the formula (subject to the 90% cap).
Under the operation of the formula, the 90% cap may come into existence and
may be removed multiple times while you participate in the benefit. We will
continue to monitor your Account Value daily and, if dictated by the formula,
systematically transfer amounts between the Permitted Sub-accounts you have
chosen and the Benefit Fixed Rate Account as dictated by the formula. Once you
elect this feature, the new transfer formula described above will be the
formula for your Annuity.
In the event that more than ninety percent (90%) of your Account Value is
allocated to the Benefit Fixed Rate Account and you have elected this feature,
up to ten percent (10%) of your Account Value currently allocated to the
Benefit Fixed Rate Account will be transferred to your Permitted Sub-accounts,
such that after the transfer, 90% of your Account Value on the date of the
transfer is in the Benefit Fixed Rate Account. The transfer to the Permitted
Sub-accounts will be based on your existing allocation instructions or (in the
absence of such existing instructions) pro rata (i.e., in the same proportion
as the current balances in your variable investment options). Amounts taken
out of the Benefit Fixed Rate Account will be withdrawn for this purpose on a
last-in, first-out basis (an amount renewed into a new guarantee period under
the Benefit Fixed Rate Account will be deemed a new investment for purposes of
this last-in, first-out rule).
Once the 90% cap rule is met, future transfers into the Benefit Fixed Rate
Account will not be made (regardless of the performance of the Benefit Fixed
Rate Account and the Permitted Sub-accounts) at least until there is a first
transfer out of the Benefit Fixed Rate Account. Once this transfer occurs out
of the Benefit Fixed Rate Account, future amounts may be transferred to or
from the Benefit Fixed Rate Account if dictated by the formula.
PLEASE BE AWARE THAT AFTER THE INITIAL TRANSFER OUT OF THE BENEFIT FIXED RATE
ACCOUNT UPON ELECTION OF THE 90% CAP, THERE IS NO ASSURANCE THAT FUTURE
TRANSFERS OUT WILL OCCUR, OR THE AMOUNT OF SUCH FUTURE TRANSFERS, AS A RESULT
OF THE ELECTION OF THE 90% CAP. THESE TRANSFERS WILL BE DETERMINED BY THE
MATHEMATICAL FORMULA AND DEPEND ON A NUMBER OF FACTORS UNIQUE TO YOUR ANNUITY.
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IMPORTANT CONSIDERATIONS WHEN ELECTING THE NEW FORMULA:
.. At any given time, some, most or none of your Account Value may be
allocated to the Benefit Fixed Rate Account.
.. Please be aware that because of the way the new 90% cap formula operates,
it is possible that more than or less than 90% of your Account Value may be
allocated to the Benefit Fixed Rate Account.
.. Because the charge for Highest Daily Lifetime Five is assessed against the
average daily net assets of the Sub-accounts, that charge will be assessed
against all assets transferred into the Permitted Sub-accounts.
.. If this feature is elected, any Account Value transferred to the Permitted
Sub-accounts is subject to the investment performance of those
Sub-accounts. Your Account Value can go up or down depending of the
performance of the Permitted Sub-accounts you select.
HIGHEST DAILY LIFETIME SEVEN INCOME BENEFIT (HD 7)/ /
Highest Daily Lifetime Seven Income Benefit is no longer available for new
elections. The income benefit under Highest Daily Lifetime Seven currently is
based on a single "designated life" who is at least 55 years old on the date
that the benefit is acquired. The Highest Daily Lifetime Seven Benefit was not
available if you elected any other optional living benefit, although you may
have elected any optional death benefit other than the Highest Daily Value
death benefit or the Plus40 Life Insurance Rider. As long as your Highest
Daily Lifetime Seven Benefit is in effect, you must allocate your Account
Value in accordance with the then permitted and available investment option(s)
with this benefit. For a more detailed description of the permitted investment
options, see the Investment options section of this prospectus. Highest Daily
Lifetime Seven, is only available in those states that have not yet approved
Highest Daily Lifetime 7 Plus. We no longer permit new elections of Highest
Daily Lifetime Seven.
Highest Daily Lifetime Seven guarantees until the death of the single
designated life the ability to withdraw an annual amount (the "Annual Income
Amount") equal to a percentage of an initial principal value (the "Protected
Withdrawal Value") regardless of the impact of market performance on the
Account Value, subject to our benefit rules regarding the timing and amount of
withdrawals. The benefit may be appropriate if you intend to make periodic
withdrawals from your Annuity, and wish to ensure that market performance will
not affect your ability to receive annual payments. You are not required to
make withdrawals as part of the benefit - the guarantees are not lost if you
withdraw less than the maximum allowable amount each year under the rules of
the benefit. As discussed below, we require that you participate in our
pre-determined mathematical formula in order to participate in Highest Daily
Lifetime Seven, and in Appendix K to this prospectus, we set forth the formula
under which we make the asset transfers. Withdrawals are taken first from your
own Account Value. We are only required to begin making lifetime income
payments to you under our guarantee when and if your Account Value is reduced
to zero (unless the benefit has terminated).
As discussed below, a key component of Highest Daily Lifetime Seven is the
Protected Withdrawal Value. Because each of the Protected Withdrawal Value and
Annual Income Amount is determined in a way that is not solely related to
Account Value, it is possible for the Account Value to fall to zero, even
though the Annual Income Amount remains. You are guaranteed to be able to
withdraw the Annual Income Amount for the rest of your life, provided that you
have not made "excess withdrawals." Excess withdrawals, as discussed below,
will reduce your Annual Income Amount. Thus, you could experience a scenario
in which your Account Value was zero, and, due to your excess withdrawals,
your Annual Income Amount also was reduced to zero. In that scenario, no
further amount would be payable under Highest Daily Lifetime Seven.
KEY FEATURE - PROTECTED WITHDRAWAL VALUE
The Protected Withdrawal Value is used to calculate the initial Annual Income
Amount. On the effective date of the benefit, the Protected Withdrawal Value
is equal to your Account Value. On each Valuation Day thereafter, until the
earlier of the tenth anniversary of benefit election (the "Tenth Anniversary
Date") or the date of the first withdrawal, the Protected Withdrawal Value is
equal to the "Periodic Value" described in the next paragraph.
The "Periodic Value" initially is equal to the Account Value on the effective
date of the benefit. On each Valuation Day thereafter, until the earlier of
the first withdrawal or the Tenth Anniversary Date, we recalculate the
Periodic Value. We stop determining the Periodic Value upon the earlier of
your first withdrawal after the effective date of the benefit or the Tenth
Anniversary Date. On each Valuation Day (the "Current Valuation Day"), the
Periodic Value is equal to the greater of:
(1)the Periodic Value for the immediately preceding business day (the "Prior
Valuation Day") appreciated at the daily equivalent of 7% annually during
the calendar day(s) between the Prior Valuation Day and the Current
Valuation Day (i.e., one day for successive Valuation Days, but more than
one calendar day for Valuation Days that are separated by weekends and/or
holidays), plus the amount of any adjusted Purchase Payment made on the
Current Valuation Day; and
(2)the Account Value.
If you make a withdrawal prior to the Tenth Anniversary Date, the Protected
Withdrawal Value on the date of the withdrawal is equal to the greatest of:
(a)the Account Value; or
(b)the Periodic Value on the date of the withdrawal.
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If you have not made a withdrawal on or before the Tenth Anniversary Date,
your Protected Withdrawal Value subsequent to the Tenth Anniversary Date is
equal to the greatest of:
(1)the Account Value; or
(2)the Periodic Value on the Tenth Anniversary Date, increased for subsequent
adjusted Purchase Payments; or
(3)the sum of:
(a)200% of the Account Value on the effective date of the benefit;
(b)200% of all adjusted Purchase Payments made within one year after the
effective date of the benefit; and
(c)all adjusted Purchase Payments made after one year following the
effective date of the benefit up to the date of the first withdrawal.
On and after the date of your first withdrawal, your Protected Withdrawal
Value is increased by the amount of any subsequent Purchase Payments, is
reduced by withdrawals, including your first withdrawal (as described below),
and is increased if you qualify for a step-up (as described below).
Irrespective of these calculations, your Protected Withdrawal Value will
always be at least equal to your Account Value.
KEY FEATURE - ANNUAL INCOME AMOUNT UNDER THE HIGHEST DAILY LIFETIME SEVEN
BENEFIT
The Annual Income Amount is equal to a specified percentage of the Protected
Withdrawal Value at the first withdrawal taken after the benefit becomes
active and does not reduce in subsequent Annuity Years, as described below.
The percentage depends on the age of the Annuitant on the date of the first
withdrawal after election of the benefit. The percentages are: 5% for ages 74
and younger, 6% for ages 75-79, 7% for ages 80-84, and 8% for ages 85 and
older.
Under the Highest Daily Lifetime Seven benefit, if your cumulative withdrawals
in an Annuity Year are less than or equal to the Annual Income Amount, they
will not reduce your Annual Income Amount in subsequent Annuity Years, but any
such withdrawals will reduce the Annual Income Amount on a dollar-for-dollar
basis in that Annuity Year. If your cumulative withdrawals are in excess of
the Annual Income Amount ("Excess Income"), your Annual Income Amount in
subsequent years will be reduced (except with regard to required minimum
distributions) by the result of the ratio of the Excess Income to the Account
Value immediately prior to such withdrawal (see examples of this calculation
below). Withdrawals of any amount up to and including the Annual Income Amount
will reduce the Protected Withdrawal Value by the amount of the withdrawal.
Withdrawals of Excess Income will reduce the Protected Withdrawal Value by the
same ratio as the reduction to the Annual Income Amount.
Any Purchase Payment that you make will (i) increase the then-existing Annual
Income Amount by an amount equal to a percentage of the Purchase Payment based
on the age of the Annuitant at the time of the first withdrawal (the
percentages are: 5% for ages 74 and younger, 6% for ages 75-79, 7% for ages
80-84, and 8% for ages 85 and older) and (ii) increase the Protected
Withdrawal Value by the amount of the Purchase Payment.
If your Annuity permits additional purchase payments, we may limit any
additional purchase payment(s) if we determine that as a result of the timing
and amounts of your additional purchase payments and withdrawals, the Annual
Income Amount is being increased in an unintended fashion. Among the factors
we will use in making a determination as to whether an action is designed to
increase the Annual Income Amount in an unintended fashion is the relative
size of additional purchase payment(s). Subject to state law, we reserve the
right to not accept additional purchase payments if we are not then offering
this benefit for new elections. We will exercise such reservation of right for
all annuity purchasers in the same class in a nondiscriminatory manner.
An automatic step-up feature ("Highest Quarterly Auto Step-Up") is included as
part of this benefit. As detailed in this paragraph, the Highest Quarterly
Auto Step-Up feature can result in a larger Annual Income Amount if your
Account Value increases subsequent to your first withdrawal. We begin
examining the Account Value for purposes of the Highest Quarterly Step-Up
starting with the anniversary of the Issue Date of the Annuity (the "Annuity
Anniversary") immediately after your first withdrawal under the benefit.
Specifically, upon the first such Annuity Anniversary, we identify the Account
Value on the Valuation Days corresponding to the end of each quarter that
(i) is based on your Annuity Year, rather than a calendar year; (ii) is
subsequent to the first withdrawal; and (iii) falls within the immediately
preceding Annuity Year. If the end of any such quarter falls on a holiday or a
weekend, we use the next Valuation Day. Having identified each of those
quarter-end Account Values, we then multiply each such value by a percentage
that varies based on the age of the Annuitant on the Annuity Anniversary as of
which the step-up would occur. The percentages are 5% for ages 74 and younger,
6% for ages 75-79, 7% for ages 80-84, and 8% for ages 85 and older. Thus, we
multiply each quarterly value by the applicable percentage, adjust each such
quarterly value for subsequent withdrawals and Purchase Payments, and then
select the highest of those values. If the highest of those values exceeds the
existing Annual Income Amount, we replace the existing amount with the new,
higher amount. Otherwise, we leave the existing Annual Income Amount intact.
In later years, (i.e., after the first Annuity Anniversary after the first
withdrawal) we determine whether an automatic step-up should occur on each
Annuity Anniversary, by performing a similar examination of the Account Values
on the end of the four immediately preceding quarters. At the time that we
increase your Annual Income Amount, we also increase your Protected Withdrawal
Value to equal the highest quarterly value upon which your step-up was based.
If, on the date that we implement a Highest Quarterly Auto Step-Up to your
Annual Income Amount, the charge for Highest Daily Lifetime Seven has
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changed for new purchasers, you may be subject to the new charge at the time
of such step-up. Prior to increasing your charge for Highest Daily Lifetime
Seven upon a step-up, we would notify you, and give you the opportunity to
cancel the automatic step-up feature. If you receive notice of a proposed
step-up and accompanying fee increase, you should carefully evaluate whether
the amount of the step-up justifies the increased fee to which you will be
subject.
The Highest Daily Lifetime Seven benefit does not affect your ability to make
withdrawals under your Annuity, or limit your ability to request withdrawals
that exceed the Annual Income Amount. Under Highest Daily Lifetime Seven, if
your cumulative withdrawals in an Annuity Year are less than or equal to the
Annual Income Amount, they will not reduce your Annual Income Amount in
subsequent Annuity Years, but any such withdrawals will reduce the Annual
Income Amount on a dollar-for-dollar basis in that Annuity Year.
If, cumulatively, you withdraw an amount less than the Annual Income Amount in
any Annuity Year, you cannot carry-over the unused portion of the Annual
Income Amount to subsequent Annuity Years.
Examples of dollar-for-dollar and proportional reductions, and the Highest
Quarterly Auto Step-Up are set forth below. The values depicted here are
purely hypothetical, and do not reflect the charges for the Highest Daily
Lifetime Seven benefit or any other fees and charges. Assume the following for
all three examples:
.. The Issue Date is December 1, 2007
.. The Highest Daily Lifetime Seven benefit is elected on March 5, 2008
.. The Annuitant was 70 years old when he/she elected the Highest Daily
Lifetime Seven benefit.
DOLLAR-FOR-DOLLAR REDUCTIONS
On May 2, 2008, the Protected Withdrawal Value is $120,000, resulting in an
Annual Income Amount of $6,000 (since the Annuitant is younger than 75 at the
time of the 1/st/ withdrawal, the Annual Income Amount is 5% of the Protected
Withdrawal Value, in this case 5% of $120,000). Assuming $2,500 is withdrawn
from the Annuity on this date, the remaining Annual Income Amount for that
Annuity Year (up to and including December 1, 2008) is $3,500. This is the
result of a dollar-for-dollar reduction of the Annual Income Amount-$6,000
less $2,500 = $3,500.
PROPORTIONAL REDUCTIONS
Continuing the previous example, assume an additional withdrawal of $5,000
occurs on August 6, 2008 and the Account Value at the time of this withdrawal
is $110,000. The first $3,500 of this withdrawal reduces the Annual Income
Amount for that Annuity Year to $0. The remaining withdrawal amount - $1,500 -
reduces the Annual Income Amount in future Annuity Years on a proportional
basis based on the ratio of the excess withdrawal to the Account Value
immediately prior to the excess withdrawal. (Note that if there were other
withdrawals in that Annuity Year, each would result in another proportional
reduction to the Annual Income Amount).
HERE IS THE CALCULATION:
Account Value before withdrawal $110,000.00
Less amount of "non" excess withdrawal $ 3,500.00
Account Value immediately before excess withdrawal of $1,500 $106,500.00
Excess withdrawal amount $ 1,500.00
Divided by Account Value immediately before excess withdrawal $106,500.00
Ratio 1.41%
Annual Income Amount $ 6,000.00
Less ratio of 1.41% $ 84.51
Annual Income Amount for future Annuity Years $ 5,915.49
HIGHEST QUARTERLY AUTO STEP-UP
On each Annuity Anniversary date, the Annual Income Amount is stepped-up if
the appropriate percentage (based on the Annuitant's age on the Annuity
Anniversary) of the highest quarterly value since your first withdrawal (or
last Annuity Anniversary in subsequent years), adjusted for withdrawals and
additional Purchase Payments, is higher than the Annual Income Amount,
adjusted for excess withdrawals and additional Purchase Payments.
Continuing the same example as above, the Annual Income Amount for this
Annuity Year is $6,000. However, the excess withdrawal on August 6 reduces
this amount to $5,915.49 for future years (see above). For the next Annuity
Year, the Annual Income Amount will be stepped-up if 5% (since the youngest
Designated Life is younger than 75 on the date of the potential step-up) of
the highest quarterly Account Value adjusted for withdrawals, is higher than
$5,915.49. Here are the calculations for determining the quarterly values.
Only the June 1 value is being adjusted for excess withdrawals as the
September 1 and December 1 Valuation Days occur after the excess withdrawal on
August 6.
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HIGHEST QUARTERLY VALUE
(ADJUSTED WITH ADJUSTED ANNUAL INCOME
WITHDRAWAL AND PURCHASE AMOUNT (5% OF THE
DATE* ACCOUNT VALUE PAYMENTS)** HIGHEST QUARTERLY VALUE)
----- ------------- ----------------------- ------------------------
June 1, 2008 $118,000.00 $118,000.00 $5,900.00
August 6, 2008 $110,000.00 $112,885.55 $5,644.28
September 1, 2008 $112,000.00 $112,885.55 $5,644.28
December 1, 2008 $119,000.00 $119,000.00 $5,950.00
* In this example, the Annuity Anniversary date is December 1. The quarterly
valuation dates are every three months thereafter - March 1,
June 1, September 1, and December 1. In this example, we do not use the
March 1 date as the first withdrawal took place after March 1. The Annuity
Anniversary Date of December 1 is considered the fourth and final quarterly
valuation date for the year.
** In this example, the first quarterly value after the first withdrawal is
$118,000 on June 1, yielding an adjusted Annual Income Amount of $5,900.00.
This amount is adjusted on August 6 to reflect the $5,000 withdrawal. The
calculations for the adjustments are:
. The Account Value of $118,000 on June 1 is first reduced
dollar-for-dollar by $3,500 ($3,500 is the remaining Annual Income
Amount for the Annuity Year), resulting in an adjusted Account Value of
$114,500 before the excess withdrawal.
. This amount ($114,500) is further reduced by 1.41% (this is the ratio in
the above example which is the excess withdrawal divided by the Account
Value immediately preceding the excess withdrawal) resulting in a
Highest Quarterly Value of $112,885.55.
. The adjusted Annual Income Amount is carried forward to the next
quarterly anniversary date of September 1. At this time, we compare this
amount to 5% of the Account Value on September 1. Since the June 1
adjusted Annual Income Amount of $5,644.28 is higher than $5,600.00 (5%
of $112,000), we continue to carry $5,644.28 forward to the next and
final quarterly anniversary date of December 1. The Account Value on
December 1 is $119,000 and 5% of this amount is $5,950. Since this is
higher than $5,644.28, the adjusted Annual Income Amount is reset to
$5,950.00.
In this example, 5% of the December 1 value yields the highest amount of
$5,950.00. Since this amount is higher than the current year's Annual Income
Amount of $5,915.49 adjusted for excess withdrawals, the Annual Income Amount
for the next Annuity Year, starting on December 2, 2008 and continuing through
December 1, 2009, will be stepped-up to $5,950.00.
BENEFITS UNDER THE HIGHEST DAILY LIFETIME SEVEN BENEFIT
.. To the extent that your Account Value was reduced to zero as a result of
cumulative withdrawals that are equal to or less than the Annual Income
Amount or as a result of the fee that we assess for Highest Daily Lifetime
Seven, and amounts are still payable under Highest Daily Lifetime Seven, we
will make an additional payment, if any, for that Annuity Year equal to the
remaining Annual Income Amount for the Annuity Year. Thus, in that
scenario, the remaining Annual Income Amount would be payable even though
your Account Value was reduced to zero. In subsequent Annuity Years we make
payments that equal the Annual Income Amount as described in this section.
We will make payments until the death of the single designated life. To the
extent that cumulative withdrawals in the current Annuity Year that reduced
your Account Value to zero are more than the Annual Income Amount, the
Highest Daily Lifetime Seven benefit terminates, and no additional payments
are made. However, if a withdrawal in the latter scenario was taken to meet
required minimum distribution requirements under the Annuity, then the
benefit will not terminate, and we will continue to pay the Annual Income
Amount in the form of a fixed annuity.
.. If Annuity payments are to begin under the terms of your Annuity, or if you
decide to begin receiving Annuity payments and there is a Annual Income
Amount due in subsequent Annuity Years, you can elect one of the following
two options:
(1)apply your Account Value to any Annuity option available; or
(2)request that, as of the date Annuity payments are to begin, we make
Annuity payments each year equal to the Annual Income Amount. We will
make payments until the death of the single designated life.
We must receive your request in a form acceptable to us at our office.
.. In the absence of an election when mandatory annuity payments are to begin,
we will make annual annuity payments in the form of a single life fixed
annuity with ten payments certain, by applying the greater of the annuity
rates then currently available or the annuity rates guaranteed in your
Annuity. The amount that will be applied to provide such Annuity payments
will be the greater of:
(1)the present value of the future Annual Income Amount payments. Such
present value will be calculated using the greater of the single life
fixed annuity rates then currently available or the single life fixed
annuity rates guaranteed in your Annuity; and
(2)the Account Value.
.. If no withdrawal was ever taken, we will calculate the Annual Income Amount
as if you made your first withdrawal on the date the annuity payments are
to begin.
.. Please note that payments that we make under this benefit after the Annuity
Anniversary coinciding with or next following the annuitant's 95/th/
birthday will be treated as annuity payments.
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OTHER IMPORTANT CONSIDERATIONS
.. Withdrawals under the Highest Daily Lifetime Seven benefit are subject to
all of the terms and conditions of the Annuity.
.. Withdrawals made while the Highest Daily Lifetime Seven Benefit is in
effect will be treated, for tax purposes, in the same way as any other
withdrawals under the Annuity. The Highest Daily Lifetime Seven Benefit
does not directly affect the Account Value or surrender value, but any
withdrawal will decrease the Account Value by the amount of the withdrawal.
If you surrender your Annuity you will receive the current surrender value.
.. You can make withdrawals from your Annuity while your Account Value is
greater than zero without purchasing the Highest Daily Lifetime Seven
benefit. The Highest Daily Lifetime Seven benefit provides a guarantee that
if your Account Value declines due to Sub-account performance, you will be
able to receive your Annual Income Amount in the form of periodic benefit
payments.
.. You should carefully consider when to begin taking withdrawals. If you
begin taking withdrawals early, you may maximize the time during which you
may take withdrawals due to longer life expectancy, and you will be using
an optional benefit for which you are paying a charge. On the other hand,
you could limit the value of the benefit if you begin taking withdrawals
too soon. For example, withdrawals reduce your Account Value and may limit
the potential for increasing your Protected Withdrawal Value. You should
discuss with your Financial Professional when it may be appropriate for you
to begin taking withdrawals.
.. Upon inception of the benefit and to maintain the benefit, 100% of your
Account Value must have been allocated to the permitted Sub-accounts.
.. You cannot allocate Purchase Payments or transfer Account Value to or from
the AST Investment Grade Bond Portfolio Sub-account (see description below)
if you elect this benefit. A summary description of the AST Investment
Grade Bond Portfolio appears within the prospectus section entitled "What
Are The Investment Objectives and Policies of The Portfolios?". You can
find a copy of the AST Investment Grade Bond Portfolio prospectus by going
to www.prudentialannuities.com.
.. Transfers to and from the elected Sub-accounts and an AST Investment Grade
Bond Portfolio Sub-account triggered by the mathematical formula component
of the benefit will not count toward the maximum number of free transfers
allowable under an Annuity.
.. You must allocate your Account Value in accordance with the then available
investment option(s) that we may prescribe in order to maintain the Highest
Daily Lifetime Seven benefit. If, subsequent to your election of the
benefit, we change our requirements for how Account Value must be allocated
under the benefit, we will not compel you to re-allocate your Account Value
in accordance with our newly adopted requirements. Subject to any change in
requirements, transfer of Account Value and allocation of additional
Purchase Payments may be subject to new investment limitations.
.. The fee for Highest Daily Lifetime Seven is 0.60% annually of the Protected
Withdrawal Value. We deduct this fee at the end of each quarter, where each
such quarter is part of a year that begins on the effective date of the
benefit or an anniversary thereafter. Thus, on each such quarter-end (or
the next Valuation Day, if the quarter-end is not a Valuation Day), we
deduct 0.15% of the Protected Withdrawal Value at the end of the quarter.
We deduct the fee pro rata from each of your Sub-accounts including the AST
Investment Grade Bond Portfolio Sub-account. Since this fee is based on the
Protected Withdrawal Value the fee for Highest Daily Lifetime Seven may be
greater than it would have been, had it been based on the Account Value
alone. If the fee to be deducted exceeds the current Account Value, we will
reduce the Account Value to zero, and continue the benefit as described
above. You will begin paying the charge for this benefit as of the
effective date of the benefit, even if you do not begin taking withdrawals
for many years, or ever. We will not refund the charges you have paid if
you choose never to take any withdrawals and/or if you never receive any
lifetime income payments.
.. The Basic Death Benefit will terminate if withdrawals taken under the
Highest Daily Lifetime Seven benefit cause your Account Value to reduce to
zero. Certain optional Death Benefits may terminate if withdrawals taken
under the Highest Daily Lifetime Seven benefit cause your Account Value to
reduce to zero. (See "Death Benefit" for more information.)
ELECTION OF AND DESIGNATIONS UNDER THE BENEFIT
We no longer permit new elections of Highest Daily Lifetime Seven.
For Highest Daily Lifetime Seven, there must have been either a single Owner
who was the same as the Annuitant, or if the Annuity is entity owned, there
must be a single natural person Annuitant. In either case, the Annuitant must
have been at least 55 years old.
Any change of the Annuitant under the Annuity will result in cancellation of
Highest Daily Lifetime Seven. Similarly, any change of Owner will result in
cancellation of Highest Daily Lifetime Seven, except if (a) the new Owner has
the same taxpayer identification number as the previous owner (b) ownership is
transferred from a custodian to the Annuitant, or vice versa or (c) ownership
is transferred from one entity to another entity.
Highest Daily Lifetime Seven can be elected at the time that you purchase your
Annuity or after the Issue Date if available.
If you wish, you may cancel any Highest Daily Lifetime Seven benefit. You may
then elect any other available living benefit on the Valuation Day after you
have cancelled the Highest Daily Lifetime Seven benefit, provided the request
is received in good order (subject to state availability and any applicable
age requirements). Upon cancellation of any Highest Daily Lifetime Seven
benefit, any Account Value allocated to the AST Investment Grade Bond
Portfolio Sub-account used with the formula will be reallocated to the
Permitted Sub-Accounts according to your most recent allocation instructions
or, in absence of such instructions,
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pro rata. You should be aware that upon termination of Highest Daily Lifetime
Seven, you will lose the Protected Withdrawal Value (including the Tenth
Anniversary Date Guarantee), Annual Income Amount, and the Return of Principal
Guarantee that you had accumulated under the benefit. Thus, the initial
guarantees under any newly-elected benefit will be based on your current
Account Value at the time you elect a new benefit. ONCE THE HIGHEST DAILY
LIFETIME SEVEN BENEFIT IS CANCELED YOU ARE NOT REQUIRED TO RE-ELECT ANOTHER
OPTIONAL LIVING BENEFIT AND ANY SUBSEQUENT BENEFIT ELECTION MAY BE MADE ON OR
AFTER THE FIRST VALUATION DAY FOLLOWING THE CANCELLATION OF THE HIGHEST DAILY
LIFETIME SEVEN BENEFIT PROVIDED THAT THE BENEFIT YOU ARE LOOKING TO ELECT IS
AVAILABLE ON A POST-ISSUE BASIS. IF YOU CANCEL THE BENEFIT, YOU LOSE ALL
GUARANTEES UNDER THE BENEFIT, AND YOUR GUARANTEE UNDER ANY NEW BENEFIT YOU
ELECT WILL BE BASED ON YOUR ACCOUNT VALUE AT THAT TIME. ANY SUCH NEW BENEFIT
MAY BE MORE EXPENSIVE.
RETURN OF PRINCIPAL GUARANTEE
If you have not made a withdrawal before the Tenth Anniversary, we will
increase your Account Value on that Tenth Anniversary (or the next Valuation
Day, if that anniversary is not a Valuation Day), if the requirements set
forth in this paragraph are met. On the Tenth Anniversary, we add:
a) your Account Value on the day that you elected Highest Daily Lifetime
Seven; and
b) the sum of each Purchase Payment you made during the one-year period after
you elected the benefit.
If the sum of (a) and (b) is greater than your Account Value on the Tenth
Anniversary, we increase your Account Value to equal the sum of (a) and (b),
by contributing funds from our general account. If the sum of (a) and (b) is
less than or equal to your Account Value on the Tenth Anniversary, we make no
such adjustment. The amount that we add to your Account Value under this
provision will be allocated to each of your variable investment options
(including the bond Sub-account used with this benefit), in the same
proportion that each such Sub-account bears to your total Account Value,
immediately before the application of the amount. Any such amount will not be
considered a Purchase Payment when calculating your Protected Withdrawal
Value, your death benefit, or the amount of any optional benefit that you may
have selected, and therefore will have no direct impact on any such values at
the time we add this amount. This potential addition to Account Value is
available only if you have elected Highest Daily Lifetime Seven and if you
meet the conditions set forth in this paragraph. Thus, if you take a
withdrawal prior to the Tenth Anniversary, you are not eligible to receive the
Return of Principal Guarantee.
TERMINATION OF THE BENEFIT
You may terminate the benefit at any time by notifying us. If you terminate
the benefit, any guarantee provided by the benefit will terminate as of the
date the termination is effective, and certain restrictions on re-election
will apply as described above. The benefit terminates: (i) upon your
termination of the benefit (ii) upon your surrender of the Annuity (iii) upon
your election to begin receiving annuity payments (although if you have
elected to the Annual Income Amount in the form of Annuity payments, we will
continue to pay the Annual Income Amount) (iv) upon the death of the Annuitant
(v) if both the Account Value and Annual Income Amount equal zero or (vi) if
you cease to meet our requirements for issuing the benefit (see "Elections of
Designations under the Benefit").
Upon termination of Highest Daily Lifetime Seven other than upon the death of
the Annuitant, we impose any accrued fee for the benefit (i.e., the fee for
the pro-rated portion of the year since the fee was last assessed), and
thereafter we cease deducting the charge for the benefit. With regard to your
investment allocations, upon termination we will: (i) leave intact amounts
that are held in the variable investment options, and (ii) transfer all
amounts held in the AST Investment Grade Bond Portfolio Sub-account to your
variable investment options, based on your existing allocation instructions or
(in the absence of such existing instructions) pro rata (i.e. in the same
proportion as the current balances in your variable investment options).
MATHEMATICAL FORMULA COMPONENT OF HIGHEST DAILY LIFETIME SEVEN
As indicated above, we limit the Sub-accounts to which you may allocate
Account Value if you have elected Highest Daily Lifetime Seven. For purposes
of the benefit, we refer to those permitted Sub-accounts as the "Permitted
Sub-accounts". As a requirement of participating in Highest Daily Lifetime
Seven, we require that you participate in our specialized program, under which
we may transfer Account Value between the Permitted Sub-accounts and a
specified bond fund within the Advanced Series Trust (the "AST Investment
Grade Bond Sub-account"). We determine whether to make a transfer, and the
amount of any transfer, under a non-discretionary formula, discussed below.
The AST Investment Grade Bond Sub-account is available only with this benefit,
and thus you may not allocate purchase payments to the AST Investment Grade
Bond Sub-account. Under the formula component of Highest Daily Lifetime Seven,
we monitor your Account Value daily and, if dictated by the formula,
systematically transfer amounts between the Permitted Sub-accounts you have
chosen and the AST Investment Grade Bond Sub-account. Any transfer would be
made in accordance with a formula, which is set forth in Appendix K to this
prospectus.
Speaking generally, the formula, which we apply each Valuation Day, operates
as follows. The formula starts by identifying an income basis for that day and
then multiplies that figure by 5%, to produce a projected (i.e., hypothetical)
income amount. Note that we use 5% in the formula, irrespective of the
Annuitant's attained age. Then we produce an estimate of the total amount we
would target in our allocation model, based on the projected income amount and
factors set forth in the formula. In the formula, we refer to that value as
the "Target Value" or "L". If you have already made a withdrawal, your
projected income amount (and thus
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your Target Value) would take into account any automatic step-up, any
subsequent purchase payments, and any excess withdrawals. Next, the formula
subtracts from the Target Value the amount held within the AST Investment
Grade Bond Sub-account on that day, and divides that difference by the amount
held within the Permitted Sub-accounts. That ratio, which essentially isolates
the amount of your Target Value that is not offset by amounts held within the
AST Investment Grade Bond Sub-account, is called the "Target Ratio" or "r". If
the Target Ratio exceeds a certain percentage (currently 83%), it means
essentially that too much Target Value is not offset by assets within the AST
Investment Grade Bond Sub-account, and therefore we will transfer an amount
from your Permitted Sub-accounts to the AST Investment Grade Bond Sub-account.
Conversely, if the Target Ratio falls below a certain percentage (currently
77%), then a transfer from the AST Investment Grade Bond Sub-account to the
Permitted Sub-accounts would occur.
If you elect the new formula (90% Cap Feature), see discussion regarding that
feature.
As you can glean from the formula, poor investment performance of your Account
Value may result in a transfer of a portion of your variable Account Value to
the AST Investment Grade Bond Sub-account because such poor investment
performance will tend to increase the Target Ratio. Moreover, "flat"
investment returns of your Account Value over a period of time also could
result in the transfer of your Account Value from the Permitted Sub-accounts
to the AST Investment Grade Bond Sub-account. Because the amount allocated to
the AST Investment Grade Bond Sub-account and the amount allocated to the
Permitted Sub-accounts each is a variable in the formula, the investment
performance of each affects whether a transfer occurs for your Annuity. In
deciding how much to transfer, we use another formula, which essentially seeks
to re-balance amounts held in the Permitted Sub-accounts and the AST
Investment Grade Bond Sub-account so that the Target Ratio meets a target,
which currently is equal to 80%. Once you elect Highest Daily Lifetime Seven,
the ratios we use will be fixed. For newly-issued Annuities that elect Highest
Daily Lifetime Seven and existing Annuities that elect Highest Daily Lifetime
Seven, however, we reserve the right, subject to any required regulatory
approval, to change the ratios.
While you are not notified when your Annuity reaches a reallocation trigger,
you will receive a confirmation statement indicating the transfer of a portion
of your Account Value either to or from the AST Investment Grade Bond
Sub-account. The formula by which the reallocation triggers operate is
designed primarily to mitigate the financial risks that we incur in providing
the guarantee under Highest Daily Lifetime Seven.
Depending on the results of the calculation relative to the reallocation
triggers, we may, on any day:
. Not make any transfer between the Permitted Sub-accounts and the AST
Investment Grade Bond Sub-account; or
. If a portion of your Account Value was previously allocated to the AST
Investment Grade Bond Sub-account, transfer all or a portion of those
amounts to the Permitted Sub-accounts, based on your existing allocation
instructions or (in the absence of such existing instructions) pro rata
(i.e., in the same proportion as the current balances in your variable
investment options); or
. Transfer all or a portion of your Account Value in the Permitted
Sub-accounts pro rata to the AST Investment Grade Bond Sub-account.
Therefore, at any given time, some, none, or all of your Account Value may be
allocated to the AST Investment Grade Bond Sub-account. If your entire Account
Value is transferred to the AST Investment Grade Bond Sub-account, then based
on the way the formula operates, the formula will not transfer amounts out of
the AST Investment Grade Bond Sub-account to the Permitted Sub-accounts and
the entire Account Value would remain in the AST Investment Grade Bond
Sub-account. If you make additional purchase payments to your Annuity, they
will be allocated to the Sub-accounts according to your allocation
instructions. Such additional purchase payments may or may not cause the
formula to transfer money in or out of the AST Investment Grade Bond
Sub-account. Once the purchase payments are allocated to your Annuity, they
will also be subject to the formula, which may result in immediate transfers
to or from the AST Investment Grade Bond Sub-accounts, if dictated by the
formula. The amounts of any such transfers will vary as dictated by the
formula, and will depend on the factors listed below.
Prior to the first withdrawal, the primary driver of transfers to the AST
Investment Grade Bond Sub-account is difference between your Account Value and
your Protected Withdrawal Value. If none of your Account Value is allocated to
the AST Investment Grade Bond Sub-account, then over time the formula permits
an increasing difference between the Account Value and the Protected
Withdrawal Value before a transfer to the AST Investment Grade Bond
Sub-account occurs. Therefore, as time goes on, while none of your Account
Value is allocated to the AST Investment Grade Bond Sub-account, the smaller
the difference between the Protected Withdrawal Value and the Account Value,
the more the Account Value can decrease prior to a transfer to the AST
Investment Grade Bond Sub-account.
Each market cycle is unique, therefore the performance of your Sub-accounts,
and its impact on your Account Value, will differ from market cycle to market
cycle producing different transfer activity under the formula. The amount and
timing of transfers to and from the AST Investment Grade Bond Sub-account
pursuant to the formula depend on various factors unique to your Annuity and
are not necessarily directly correlated with the securities markets, bond
markets, interest rates or any other market or index. Some of the factors that
determine the amount and timing of transfers (as applicable to your Annuity),
include:
. The difference between your Account Value and your Protected Withdrawal
Value;
. The amount of time Highest Daily Lifetime Seven has been in effect on
your Annuity;
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. The amount allocated to and the performance of the Permitted
Sub-accounts and the AST Investment Grade Bond Sub-account;
. Any additional Purchase Payments you make to your Annuity (while the
benefit is in effect); and
. Any withdrawals you take from your Annuity (while the benefit is in
effect).
Because the amount allocated to the AST Investment Grade Bond Sub-account and
the amount allocated to the Permitted Sub-accounts each is a variable in the
formula, the investment performance of each affects whether a transfer occurs
for your Annuity. The greater the amounts allocated to either the AST
Investment Grade Bond Sub-account or to the Permitted Sub-accounts, the
greater the impact performance of those investments have on your Account Value
and thus the greater the impact on whether (and how much) your Account Value
is transferred to or from the AST Investment Grade Bond Sub-account. It is
possible, under the formula, that if a significant portion of your Account
Value is allocated to the AST Investment Grade Bond Sub-account and that
Sub-account has positive performance, the formula might transfer a portion of
your Account Value to the Permitted Sub-accounts, even if the performance of
your Permitted Sub-accounts is negative. Conversely, if a significant portion
of your Account Value is allocated to the AST Investment Grade Bond
Sub-account and that Sub-account has negative performance, the formula may
transfer additional amounts from your Permitted Sub-accounts to the AST
Investment Grade Bond Sub-account even if the performance of your Permitted
Sub-accounts is positive.
If you make additional Purchase Payments to your Annuity, they will be
allocated in accordance with your Annuity. Once allocated, they will also be
subject to the formula described above and therefore may be transferred to the
AST Investment Grade Bond Sub-account, if dictated by the formula.
Any Account Value in the AST Investment Grade Bond Sub-account will not
participate in the positive or negative investment experience of the Permitted
Sub-accounts until it is transferred out of the AST Investment Grade Bond
Sub-account.
ADDITIONAL TAX CONSIDERATIONS
If you purchase an annuity as an investment vehicle for "qualified"
investments, including an IRA, SEP-IRA, Tax Sheltered Annuity (or 403(b)) or
employer plan under Code Section 401(a), the Required Minimum Distribution
rules under the Code provide that you begin receiving periodic amounts from
your annuity beginning after age 70 1/2. For a Tax Sheltered Annuity or a
401(a) plan for which the participant is not a greater than five (5) percent
owner of the employer, this required beginning date can generally be deferred
to retirement, if later. Roth IRAs are not subject to these rules during the
owner's lifetime. The amount required under the Code may exceed the Annual
Income Amount, which will cause us to increase the Annual Income Amount in any
Annuity Year that Required Minimum Distributions due from your Annuity are
greater than such amounts. In addition, the amount and duration of payments
under the annuity payment and death benefit provisions may be adjusted so that
the payments do not trigger any penalty or excise taxes due to tax
considerations such as Required Minimum Distribution provisions under the tax
law. Please note, however, that any withdrawal you take prior to the Tenth
Anniversary, even if withdrawn to satisfy required minimum distribution rules,
will cause you to lose the ability to receive the Return of Principal
Guarantee and the guaranteed amount described above under "Key Feature -
Protected Withdrawal Value".
As indicated, withdrawals made while this Benefit is in effect will be
treated, for tax purposes, in the same way as any other withdrawals under the
Annuity. Please see the Tax Considerations section of the prospectus for a
detailed discussion of the tax treatment of withdrawals. We do not address
each potential tax scenario that could arise with respect to this Benefit
here. However, we do note that if you participate in Highest Daily Lifetime
Seven through a non-qualified annuity, as with all withdrawals, once all
Purchase Payments are returned under the Annuity, all subsequent withdrawal
amounts will be taxed as ordinary income.
HIGHEST DAILY LIFETIME SEVEN WITH BENEFICIARY INCOME OPTION/SM /
There is an optional death benefit feature under this benefit, the amount of
which is linked to your Annual Income Amount. We refer to this optional death
benefit as the Beneficiary Income Option or ("BIO"). Highest Daily Lifetime
Seven was available without also selecting the Beneficiary Income Option death
benefit. We no longer permit elections of the Highest Daily Lifetime Seven
with Beneficiary Income Option benefit. If you terminate your Highest Daily
Lifetime Seven with BIO benefit to elect any other available living benefit,
you will lose the guarantees that you had accumulated under your Highest Daily
Lifetime Seven with BIO benefit and will begin new guarantees under the newly
elected benefit.
If you have elected this death benefit, you may not elect any other optional
benefit. You may have elected the Beneficiary Income Option death benefit so
long as the Annuitant is no older than age 75 at the time of election. For
purposes of this optional death benefit, we calculate the Annual Income Amount
and Protected Withdrawal Value in the same manner that we do under Highest
Daily Lifetime Seven itself . Because the fee for this benefit is based on the
Protected Withdrawal Value, the fee for Highest Daily Lifetime Seven with the
Beneficiary Income Option may be greater than it would have been based on the
Account Value alone.
Upon a death that triggers payment of a death benefit under the Annuity, we
identify the following amounts: (a) the amount of the basic death benefit
under the Annuity (b) the Protected Withdrawal Value and (c) the Annual Income
Amount. If there were no withdrawals prior to the date of death, then we
calculate the Protected Withdrawal Value for purposes of this death benefit as
of the date of death, and we calculate the Annual Income Amount as if there
were a withdrawal on the date of death. If there were
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withdrawals prior to the date of death, then we set the Protected Withdrawal
Value and Annual Income Amount for purposes of this death benefit as of the
date that we receive due proof of death.
If there is one beneficiary, he/she must choose to receive either the basic
death benefit (in a lump sum or other permitted form of distribution) or the
Beneficiary Income Option death benefit (in the form of periodic payments of
the Annual Income Amount - such payments may be annual or at other intervals
that we permit). If there are multiple beneficiaries, each beneficiary is
presented with the same choice. Thus, each beneficiary can choose to take
his/her portion of either (a) the basic death benefit or (b) the Beneficiary
Income Option death benefit. In order to receive the Beneficiary Income Option
death benefit, each beneficiary's share of the death benefit proceeds must be
allocated as a percentage of the total death benefit to be paid. We allow a
beneficiary who has opted to receive the Annual Income Amount to designate
another beneficiary, who would receive any remaining payments upon the former
beneficiary's death. Note also that the final payment, exhausting the
Protected Withdrawal Value, may be less than the Annual Income Amount.
Here is an example to illustrate how the death benefit may be paid:
.. Assume that (i) the basic death benefit is $50,000, the Protected
Withdrawal Value is $100,000, and the Annual Income Amount is $5,000;
(ii) there are two beneficiaries (the first designated to receive 75% of
the death benefit and the second designated to receive 25% of the death
benefit); (iii) the first beneficiary chooses to receive his/her portion of
the death benefit in the form of the Annual Income Amount, and the second
beneficiary chooses to receive his/her portion of the death benefit with
reference to the basic death benefit.
.. Under those assumptions, the first beneficiary will be paid a pro-rated
portion of the Annual Income Amount for 20 years (the 20 year pay out
period is derived from the $5,000 Annual Income Amount, paid each year
until it exhausts the entire $100,000 Protected Withdrawal Value).
The pro-rated portion of the Annual Income Amount, equal to $3,750 annually
(i.e., the first beneficiary's 75% share multiplied by $5000), is then paid
each year for the 20 year period. Payment of $3,750 for 20 years results in
total payments of $75,000 (i.e., the first beneficiary's 75% share of the
$100,000 Protected Withdrawal Value).
The second beneficiary would receive 25% of the basic death benefit amount (or
$12,500).
If you elect to terminate Highest Daily Lifetime Seven with Beneficiary Income
Option, both Highest Daily Lifetime Seven and that death benefit option will
be terminated. You may not terminate the death benefit option without
terminating the entire benefit. If you terminate Highest Daily Lifetime Seven
with Beneficiary Income Option, your ability to elect other optional living
benefits will be affected as indicated in the "Election of Designations under
the Benefit" section, above.
HIGHEST DAILY LIFETIME SEVEN WITH LIFETIME INCOME ACCELERATOR/SM/
There is another version of Highest Daily Lifetime Seven that we call Highest
Daily Lifetime Seven with Lifetime Income Accelerator ("Highest Daily Lifetime
Seven with LIA"). We no longer permit elections of Highest Daily Lifetime
seven with LIA. If you have elected this benefit, you may not elect any other
optional benefit. The income benefit under Highest Daily Lifetime Seven with
LIA currently is based on a single "designated life" who was between the ages
of 55 and 75 on the date that the benefit was elected. If you terminate your
Highest Daily Lifetime Seven Benefit with LIA to elect any other available
living benefit, you will lose the guarantees that you had accumulated under
your Highest Daily Lifetime Seven Benefit with LIA and will begin the new
guarantees under the newly elected benefit based on the Account Value as of
the date the new benefit becomes active.
Highest Daily Lifetime Seven with LIA is not long-term care insurance and
should not be purchased as a substitute for long-term care insurance. The
income you receive through the Lifetime Income Accelerator may be used for any
purpose, and it may or may not be sufficient to address expenses you may incur
for long-term care. You should seek professional advice to determine your
financial needs for long-term care.
Highest Daily Lifetime Seven with LIA guarantees, until the death of the
single designated life, the ability to withdraw an amount equal to double the
Annual Income Amount (which we refer to as the "LIA Amount") if you meet the
conditions set forth below. If you had chosen the Highest Daily Lifetime Seven
with LIA, the maximum charge is 2.00% of Protected Withdrawal Value ("PWV")
annually. We deduct the current charge (0.95% of PWV) at the end of each
quarter, where each such quarter is part of a year that begins on the
effective date of the benefit or an anniversary thereafter. Thus, on each such
quarter-end (or the next Valuation Day, if the quarter-end is not a Valuation
Day), we deduct 0.2375% of the Protected Withdrawal Value at the end of the
quarter. We deduct the fee pro rata from each of your Sub-accounts including
the AST Investment Grade Bond Portfolio Sub-account. Since this fee is based
on the protected withdrawal value, the fee for Highest Daily Lifetime Seven
with LIA may be greater than it would have been, had it been based on the
Account Value alone. If the fee to be deducted exceeds the current Account
Value, we will reduce the Account Value to zero, and continue the benefit as
described below.
If this benefit was elected within an Annuity held as a 403 (b) plan, then in
addition to meeting the eligibility requirements listed below for the LIA
Amount you must separately qualify for distributions from the 403 (b) plan
itself.
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You could have chosen Highest Daily Lifetime Seven without also electing LIA,
however you may not have elected LIA without Highest Daily Lifetime Seven. All
terms and conditions of Highest Daily Lifetime Seven apply to this version of
the benefit, except as described herein.
ELIGIBILITY REQUIREMENTS FOR LIA AMOUNT. Both a waiting period of 36 months,
from the benefit effective date, and an elimination period of 120 days, from
the date of notification that one or both of the requirements described
immediately below have been met, apply before you can become eligible for the
LIA Amount. Assuming the 36 month waiting period has been met and we have
received the notification referenced in the immediately preceding sentence,
the LIA amount would be available for withdrawal on the Valuation Day
immediately after the 120/th/ day. The waiting period and the elimination
period may run concurrently. In addition to satisfying the waiting and
elimination period, either or both of the following requirements ("LIA
conditions") must be met. It is not necessary to meet both conditions:
(1)The designated life is confined to a qualified nursing facility. A
qualified nursing facility is a facility operated pursuant to law or any
state licensed facility providing medically necessary in-patient care which
is prescribed by a licensed physician in writing and based on physical
limitations which prohibit daily living in a non-institutional setting.
(2)The designated life is unable to perform two or more basic abilities of
caring for oneself or "activities of daily living." We define these basic
abilities as:
i. Eating: Feeding oneself by getting food into the body from a receptacle
(such as a plate, cup or table) or by a feeding tube or intravenously.
ii.Dressing: Putting on and taking off all items of clothing and any
necessary braces, fasteners or artificial limbs.
iii.Bathing: Washing oneself by sponge bath; or in either a tub or shower,
including the task of getting into or out of the tub or shower.
iv.Toileting: Getting to and from the toilet, getting on and off the
toilet, and performing associated personal hygiene.
v. Transferring: Moving into or out of a bed, chair or wheelchair.
vi.Continence: Maintaining control of bowel or bladder function; or when
unable to maintain control of bowel or bladder function, the ability to
perform personal hygiene (including caring for catheter or colostomy
bag).
You must notify us when the LIA conditions have been met. If, when we receive
such notification, there are more than 120 days remaining until the end of the
waiting period described above, you will not be eligible for the LIA Amount.
If there are 120 days or less remaining until the end of the waiting period
when we receive notification that the LIA conditions are met, we will
determine eligibility for the LIA Amount through our then current
administrative process, which may include, but is not limited to,
documentation verifying the LIA conditions and/or an assessment by a third
party of our choice. Such assessment may be in person and we will assume any
costs associated with the aforementioned assessment. Once eligibility is
determined, the LIA Amount is equal to double the Annual Income Amount as
described in this prospectus under the Highest Daily Lifetime Seven Benefit.
Additionally, we will reassess your eligibility on an annual basis although
your LIA benefit for the year that immediately precedes our reassessment will
not be affected if it is determined that you are no longer eligible. Your
first reassessment may occur in the same year as your initial assessment. If
we determine you are no longer eligible to receive the LIA Amount, upon the
next Annuity Anniversary the Annual Income Amount would replace the LIA
Amount. However, if you were receiving income based on the LIA Amount and do
not take action to change your withdrawal amount to your Annual Income Amount,
any cumulative Lifetime Withdrawals in an Annuity Year that are in excess of
the Annual Income Amount will impact your Annual Income Amount in subsequent
years (except with regard to Required Minimum Distributions for this Annuity
that comply with our rules). Please note that we will not change your current
withdrawal amount unless you instruct us to do so. If you wish to establish or
make changes to your existing withdrawal program to ensure that you are not
taking Excess Income, please contact our Annuity Service Office. There is no
limit on the number of times you can become eligible for the LIA Amount,
however, each time would require the completion of the 120-day elimination
period, notification that the designated life meets the LIA conditions, and
determination, through our then current administrative process, that you are
eligible for the LIA Amount, each as described above.
You should also keep in mind that, at the time you are experiencing the LIA
conditions that would qualify you for the LIA Amount, you may also be
experiencing other disabilities that could impede your ability to conduct your
affairs. You may wish to consult with a legal advisor to determine whether you
should authorize a fiduciary who could notify us if you meet the LIA
conditions and apply for the benefit.
LIA AMOUNT AT THE FIRST WITHDRAWAL. If your first withdrawal subsequent to
election of Highest Daily Lifetime Seven with LIA occurs while you are
eligible for the LIA Amount, the available LIA Amount is equal to double the
Annual Income Amount.
LIA AMOUNT AFTER THE FIRST WITHDRAWAL. If you become eligible for the LIA
Amount after you have taken your first withdrawal, the available LIA amount
for the current and subsequent Annuity Years is equal to double the then
current Annual Income Amount, however the available LIA amount in the current
Annuity Year is reduced by any withdrawals that have been taken in the current
Annuity Year. Cumulative withdrawals in an Annuity Year which are less than or
equal to the LIA Amount (when eligible for the LIA amount) will not reduce
your LIA Amount in subsequent Annuity Years, but any such withdrawals will
reduce the LIA Amount on a dollar-for-dollar basis in that Annuity Year.
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WITHDRAWALS IN EXCESS OF THE LIA AMOUNT. If your cumulative withdrawals in an
Annuity Year are in excess of the LIA Amount when you are eligible ("Excess
Withdrawal"), your LIA Amount in subsequent years will be reduced (except with
regard to required minimum distributions) by the result of the ratio of the
excess portion of the withdrawal to the Account Value immediately prior to the
Excess Withdrawal. Reductions include the actual amount of the withdrawal.
Withdrawals of any amount up to and including the LIA Amount will reduce the
Protected Withdrawal Value by the amount of the withdrawal. Excess Withdrawals
will reduce the Protected Withdrawal Value by the same ratio as the reduction
to the LIA Amount.
Withdrawals are not required. However, subsequent to the first withdrawal, the
LIA Amount is not increased in subsequent Annuity Years if you decide not to
take a withdrawal in an Annuity Year or take withdrawals in an Annuity Year
that in total are less than the LIA Amount.
PURCHASE PAYMENTS. If you are eligible for the LIA Amount as described under
"Eligibility Requirements for LIA Amount" and you make an additional Purchase
Payment, we will increase your LIA Amount by double the amount we add to your
Annual Income Amount.
STEP UPS. If your Annual Income Amount is stepped up, your LIA Amount will be
stepped up to equal double the stepped up Annual Income Amount.
GUARANTEE PAYMENTS. If your Account Value is reduced to zero as a result of
cumulative withdrawals that are equal to or less than the LIA Amount, or as a
result of the fee that we assess for Highest Daily Lifetime Seven with LIA,
and there is still a LIA Amount available, we will make an additional payment
for that Annuity Year equal to the remaining LIA Amount. Thus, in that
scenario, the remaining LIA Amount would be payable even though your Account
Value was reduced to zero. In subsequent Annuity Years we make payments that
equal the LIA Amount as described in this section. We will make payments until
the death of the single designated life. Should the designated life no longer
qualify for the LIA amount (as described under "Eligibility Requirements for
LIA Amount" above), the Annual Income Amount would continue to be available.
Subsequent eligibility for the LIA Amount would require the completion of the
120 day elimination period as well as meeting the LIA conditions listed above
under "Eligibility Requirements for LIA Amount". To the extent that cumulative
withdrawals in the current Annuity Year that reduce your Account Value to zero
are more than the LIA Amount (except in the case of required minimum
distributions), Highest Daily Lifetime Seven with LIA terminates, and no
additional payments are made.
ANNUITY OPTIONS. In addition to the Highest Daily Lifetime Seven Annuity
Options described above, after the 10/th/ benefit anniversary you may also
request that we make annuity payments each year equal to the Annual Income
Amount. In any year that you are eligible for the LIA Amount, we make annuity
payments equal to the LIA Amount. If you would receive a greater payment by
applying your Account Value to receive payments for life under your Annuity,
we will pay the greater amount. Prior to the 10/th/ benefit anniversary this
option is not available.
We will continue to make payments until the death of the Designated Life. If
this option is elected, the Annual Income Amount and LIA Amount will not
increase after annuity payments have begun.
If you elected Highest Daily Lifetime Seven with LIA, and never meet the
eligibility requirements you will not receive any additional payments based on
the LIA Amount.
OPTIONAL 90% CAP FEATURE FOR FORMULA FOR HIGHEST DAILY LIFETIME SEVEN
If you currently own an Annuity and have elected the Highest Daily Lifetime
Seven Income Benefit (including Highest Daily Lifetime Seven with Beneficiary
Income Option and Highest Daily Lifetime Seven with Lifetime Income
Accelerator) or Spousal Highest Daily Lifetime Seven Income Benefit (including
Spousal Highest Daily Lifetime Seven with Beneficiary Income Option), you can
elect this feature which utilizes a new mathematical formula. The new formula
is described below and will replace the "Transfer Calculation" portion of the
mathematical formula currently used in connection with your benefit on a
prospective basis. This election may only be made once and may not be revoked
once elected. The new mathematical formula is found in Appendix K (page K-4).
There is no cost to adding this feature to your Annuities. Only the election
of the 90% Cap will prevent all of your Account Value from being allocated to
the AST Investment Grade Bond Portfolio Sub-account. If all of your Account
Value is currently allocated to the AST Investment Grade Bond Portfolio
Sub-account, it will not transfer back to the Permitted Sub-accounts unless
you elect the 90% Cap feature. If you make additional Purchase Payments, they
may or may not result in a transfer to or from the AST Investment Grade Bond
Portfolio Sub-account.
Under the new formula, the formula will not execute a transfer to the AST
Investment Grade Bond Sub-account that results in more than 90% of your
Account Value being allocated to the AST Investment Grade Bond Sub-account
("90% cap" or "90% Cap Rule"). Thus, on any Valuation Day, if the formula
would require a transfer to the AST Investment Grade Bond Sub-account that
would result in more than 90% of the Account Value being allocated to the AST
Investment Grade Bond Sub-account, only the amount that results in exactly 90%
of the Account Value being allocated to the AST Investment Grade Bond
Sub-account will be transferred. Additionally, future transfers into the AST
Investment Grade Bond Sub-account will not be made (regardless of the
performance of the AST Investment Grade Bond Sub-account and the Permitted
Sub-accounts) at least until there is first a transfer out of the AST
Investment Grade Bond Sub-account. Once this transfer occurs out of the AST
Investment Grade Bond
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Sub-account, future amounts may be transferred to or from the AST Investment
Grade Bond Sub-account if dictated by the formula (subject to the 90% cap). At
no time will the formula make a transfer to the AST Investment Grade Bond
Sub-account that results in greater than 90% of your Account Value being
allocated to the AST Investment Grade Bond Sub-account. HOWEVER, IT IS
POSSIBLE THAT, DUE TO THE INVESTMENT PERFORMANCE OF YOUR ALLOCATIONS IN THE
AST INVESTMENT GRADE BOND SUB-ACCOUNT AND YOUR ALLOCATIONS IN THE PERMITTED
SUB-ACCOUNTS YOU HAVE SELECTED, YOUR ACCOUNT VALUE COULD BE MORE THAN 90%
INVESTED IN THE AST INVESTMENT GRADE BOND SUB-ACCOUNT.
If you make additional purchase payments to your Annuity while the 90% cap is
in effect, the formula will not transfer any of such additional purchase
payments to the AST Investment Grade Bond Sub-account at least until there is
first a transfer out of the AST Investment Grade Bond Sub-account, regardless
of how much of your Account Value is in the Permitted Sub-accounts. This means
that there could be scenarios under which, because of the additional purchase
payments you make, less than 90% of your entire Account Value is allocated to
the AST Investment Grade Bond Sub-account, and the formula will still not
transfer any of your Account Value to the AST Investment Grade Bond
Sub-account (at least until there is first a transfer out of the AST
Investment Grade Bond Sub-account). For example,
.. March 19, 2009 - a transfer is made that results in the 90% cap being met
and now $90,000 is allocated to the AST Investment Grade Bond Sub-account
and $10,000 is allocated to the Permitted Sub-accounts.
.. March 20, 2009 - you make an additional purchase payment of $10,000. No
transfers have been made from the AST Investment Grade Bond Sub-account to
the Permitted Sub-accounts since the cap went into effect on March 19, 2009.
.. As of March 20, 2009 (and at least until first a transfer is made out of
the AST Investment Grade Bond Sub-account under the formula) - the $10,000
payment is allocated to the Permitted Sub-accounts and now you have 82% in
the AST Investment Grade Bond Sub-account and 18% in the Permitted
Sub-accounts (such that $20,000 is allocated to the Permitted Sub-accounts
and $90,000 is allocated to the AST Investment Grade Bond Sub-account).
.. Once there is a transfer out of the AST Investment Grade Bond Sub-account
(of any amount), the formula will operate as described above, meaning that
the formula could transfer amounts to or from the AST Investment Grade Bond
Sub-account if dictated by the formula (subject to the 90% cap).
Under the operation of the formula, the 90% cap may come into existence and
may be removed multiple times while you participate in the benefit. We will
continue to monitor your Account Value daily and, if dictated by the formula,
systematically transfer amounts between the Permitted Sub-accounts you have
chosen and the AST Investment Grade Bond Sub-account as dictated by the
formula. Once you elect this feature, the new transfer formula described above
and set forth in Appendix K will be the formula for your Annuity.
In the event that more than ninety percent (90%) of your Account Value is
allocated to the AST Investment Grade Bond Sub-account and you have elected
this feature, up to ten percent (10%) of your Account Value currently
allocated to the AST Investment Grade Bond Sub-account will be transferred to
your Permitted Sub-accounts, such that after the transfer, 90% of your Account
Value on the date of the transfer is in the AST Investment Grade Bond
Sub-account. The transfer to the Permitted Sub-accounts will be based on your
existing allocation instructions or (in the absence of such existing
instructions) pro rata (i.e., in the same proportion as the current balances
in your variable investment options). It is possible that additional transfers
might occur after this initial transfer if dictated by the formula. The
amounts of such additional transfer(s) will vary. If on the date this feature
is elected 100% of your Account Value is allocated to the AST Investment Grade
Bond Sub-account, a transfer of an amount equal to 10% of your Account Value
will be made to your Permitted Sub-accounts. WHILE THERE ARE NO ASSURANCES
THAT FUTURE TRANSFERS WILL OCCUR, IT IS POSSIBLE THAT AN ADDITIONAL
TRANSFER(S) TO THE PERMITTED SUB-ACCOUNTS COULD OCCUR FOLLOWING THE VALUATION
DAY(S), AND IN SOME INSTANCES (BASED ON THE FORMULA) THE ADDITIONAL
TRANSFER(S) COULD BE LARGE.
Once the 90% cap rule is met, future transfers into the AST Investment Grade
Bond Sub-account will not be made (regardless of the performance of the AST
Investment Grade Bond Sub-account and the Permitted Sub-accounts) at least
until there is first a transfer out of the AST Investment Grade Bond
Sub-account. Once this transfer occurs out of the AST Investment Grade Bond
Sub-account, future amounts may be transferred to or from the AST Investment
Grade Bond Sub-account if dictated by the formula (subject to the 90% cap).
IMPORTANT CONSIDERATION WHEN ELECTING THE NEW FORMULA:
.. At any given time, some, most or none of your Account Value may be
allocated to the AST Investment Grade Bond Sub-account.
.. Please be aware that because of the way the 90% cap formula operates, it is
possible that more than or less than 90% of your Account Value may be
allocated to the AST Investment Grade Bond Sub-account.
.. If this feature is elected, any Account Value transferred to the Permitted
Sub-accounts is subject to the investment performance of those
Sub-accounts. Your Account Value can go up or down depending of the
performance of the Permitted Sub-accounts you select.
SPOUSAL HIGHEST DAILY LIFETIME SEVEN/SM/ INCOME BENEFIT (SHD7)/SM/
Spousal Highest Daily Lifetime Seven is the spousal version of Highest Daily
Lifetime Seven. We no longer permit new elections of Spousal Highest Daily
Lifetime Seven. Spousal Highest Daily Lifetime Seven must have been elected
based on two Designated
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Lives, as described below. Each Designated Life must have been at least 59 1/2
years old when the benefit was elected. Spousal Highest Daily Lifetime Seven
was not available if you elected any other optional living benefit or optional
death benefit. As long as your Spousal Highest Daily Lifetime Seven Benefit is
in effect, you must allocate your Account Value in accordance with the then
permitted and available investment option(s) with this benefit. For a more
detailed description of permitted investment options, see the "Investment
Options" section of this prospectus.
The benefit that guarantees until the later death of two natural persons who
are each other's spouses at the time of election of the benefit and at the
first death of one of them (the "Designated Lives", and each, a "Designated
Life") the ability to withdraw an annual amount (the "Annual Income Amount")
equal to a percentage of an initial principal value (the "Protected Withdrawal
Value") regardless of the impact of Sub-account performance on the Account
Value, subject to our benefit rules regarding the timing and amount of
withdrawals. The benefit may be appropriate if you intend to make periodic
withdrawals from your Annuity, wish to ensure that Sub-account performance
will not affect your ability to receive annual payments, and wish either
spouse to be able to continue the Spousal Highest Daily Lifetime Seven benefit
after the death of the first spouse. You are not required to make withdrawals
as part of the benefit - the guarantees are not lost if you withdraw less than
the maximum allowable amount each year under the rules of the benefit. As
discussed below, we require that you participate in our pre-determined
mathematical formula in order to participate in Spousal Highest Daily Lifetime
Seven, and in Appendix K to this prospectus, we set forth the formula under
which we make the asset transfers. Withdrawals are taken first from your own
Account Value. We are only required to begin making lifetime income payments
to you under our guarantee when and if your Account Value is reduced to zero
(unless the benefit has terminated).
As discussed below, a key component of Spousal Highest Daily Lifetime Seven is
the Protected Withdrawal Value. Because each of the Protected Withdrawal Value
and Annual Income Amount is determined in a way that is not solely related to
Account Value, it is possible for the Account Value to fall to zero, even
though the Annual Income Amount remains. You are guaranteed to be able to
withdraw the Annual Income Amount until the death of the second Designated
Life, provided that there have not been "excess withdrawals." Excess
withdrawals, as discussed below, will reduce your Annual Income Amount. Thus,
you could experience a scenario in which your Account Value was zero, and, due
to your excess withdrawals, your Annual Income Amount also was reduced to
zero. In that scenario, no further amount would be payable under Spousal
Highest Daily Lifetime Seven.
KEY FEATURE - PROTECTED WITHDRAWAL VALUE
The Protected Withdrawal Value is used to calculate the initial Annual Income
Amount. On the effective date of the benefit, the Protected Withdrawal Value
is equal to your Account Value. On each Valuation Day thereafter, until the
earlier of the tenth anniversary of benefit election (the "Tenth Anniversary
Date") or the date of the first withdrawal, the Protected Withdrawal Value is
equal to the "Periodic Value" described in the next paragraph.
The "Periodic Value" initially is equal to the Account Value on the effective
date of the benefit. On each Valuation Day thereafter, until the earlier of
the first withdrawal or the Tenth Anniversary Date, we recalculate the
Periodic Value. We stop determining the Periodic Value upon the earlier of
your first withdrawal after the effective date of the benefit or the Tenth
Anniversary Date. On each Valuation Day (the "Current Valuation Day"), the
Periodic Value is equal to the greater of:
(1)the Periodic Value for the immediately preceding business day (the "Prior
Valuation Day") appreciated at the daily equivalent of 7% annually during
the calendar day(s) between the Prior Valuation Day and the Current
Valuation Day (i.e., one day for successive Valuation Days, but more than
one calendar day for Valuation Days that are separated by weekends and/or
holidays), plus the amount of any adjusted Purchase Payment made on the
Current Valuation Day; and
(2)the Account Value.
If you make a withdrawal prior to the Tenth Anniversary Date, the Protected
Withdrawal Value on the date of the withdrawal is equal to the greatest of:
(1)the Account Value; or
(2)the Periodic Value on the date of the withdrawal.
If you have not made a withdrawal on or before the Tenth Anniversary Date,
your Protected Withdrawal Value subsequent to the Tenth Anniversary Date is
equal to the greatest of:
(1)the Account Value; or
(2)the Periodic Value on the Tenth Anniversary Date, increased for subsequent
adjusted Purchase Payments; or
(3)the sum of:
(a)200% of the Account Value on the effective date of the benefit;
(b)200% of all adjusted Purchase Payments made within one year after the
effective date of the benefit; and
(c)all adjusted Purchase Payments made after one year following the
effective date of the benefit up to the date of the first withdrawal.
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On and after the date of your first withdrawal, your Protected Withdrawal
Value is increased by the amount of any subsequent Purchase Payments, is
reduced by withdrawals, including your first withdrawal (as described below),
and is increased if you qualify for a step-up (as described below).
Irrespective of these calculations, your Protected Withdrawal Value will
always be at least equal to your Account Value.
KEY FEATURE - ANNUAL INCOME AMOUNT UNDER THE SPOUSAL HIGHEST DAILY LIFETIME
SEVEN BENEFIT
The Annual Income Amount is equal to a specified percentage of the Protected
Withdrawal Value at the first withdrawal taken after the benefit becomes
active and does not reduce in subsequent Annuity Years, as described below.
The percentage depends on the age of the youngest Designated Life on the date
of the first withdrawal after election of the benefit. The percentages are: 5%
for ages 79 and younger, 6% for ages 80 to 84, 7% for ages 85 to 89, and 8%
for ages 90 and older. We use the age of the youngest Designated Life even if
that Designated Life is no longer a participant under the Annuity due to death
or divorce.
Under the Spousal Highest Daily Lifetime Seven benefit, if your cumulative
withdrawals in an Annuity Year are less than or equal to the Annual Income
Amount, they will not reduce your Annual Income Amount in subsequent Annuity
Years, but any such withdrawals will reduce the Annual Income Amount on a
dollar-for-dollar basis in that Annuity Year. If your cumulative withdrawals
are in excess of the Annual Income Amount ("Excess Income"), your Annual
Income Amount in subsequent years will be reduced (except with regard to
required minimum distributions) by the result of the ratio of the Excess
Income to the Account Value immediately prior to such withdrawal (see examples
of this calculation below). Withdrawals of any amount up to and including the
Annual Income Amount will reduce the Protected Withdrawal Value by the amount
of the withdrawal. Withdrawals of Excess Income will reduce the Protected
Withdrawal Value by the same ratio as the reduction to the Annual Income
Amount.
Any Purchase Payment that you make will (i) increase the then-existing Annual
Income Amount by an amount equal to a percentage of the Purchase Payment based
on the age of the Annuitant at the time of the first withdrawal (the
percentages are: 5% for ages 79 and younger, 6% for ages 80-84, 7% for ages
85-89, and 8% for ages 90 and older) and (ii) increase the Protected
Withdrawal Value by the amount of the Purchase Payment.
If your Annuity permits additional purchase payments, we may limit any
additional purchase payment(s) if we determine that as a result of the timing
and amounts of your additional purchase payments and withdrawals, the Annual
Income Amount is being increased in an unintended fashion. Among the factors
we will use in making a determination as to whether an action is designed to
increase the Annual Income Amount in an unintended fashion is the relative
size of additional purchase payment(s). Subject to state law, we reserve the
right to not accept additional purchase payments if we are not then offering
this benefit for new elections. We will exercise such reservation of right for
all annuity purchasers in the same class in a nondiscriminatory manner.
An automatic step-up feature ("Highest Quarterly Auto Step-Up") is included as
part of this benefit. As detailed in this paragraph, the Highest Quarterly
Auto Step-Up feature can result in a larger Annual Income Amount if your
Account Value increases subsequent to your first withdrawal. We begin
examining the Account Value for purposes of the Highest Quarterly Step-Up
starting with the anniversary of the Issue Date of the Annuity (the "Annuity
Anniversary") immediately after your first withdrawal under the benefit.
Specifically, upon the first such Annuity Anniversary, we identify the Account
Value on the Valuation Days corresponding to the end of each quarter that
(i) is based on your Annuity Year, rather than a calendar year; (ii) is
subsequent to the first withdrawal; and (iii) falls within the immediately
preceding Annuity Year. If the end of any such quarter falls on a holiday or a
weekend, we use the next Valuation Day. Having identified each of those
quarter-end Account Values, we then multiply each such value by a percentage
that varies based on the age of the youngest Designated Life on the Annuity
Anniversary as of which the step-up would occur. The percentages are 5% for
ages 79 and younger, 6% for ages 80-84, 7% for ages 85-89, and 8% for ages 90
and older. Thus, we multiply each quarterly value by the applicable
percentage, adjust each such quarterly value for subsequent withdrawals and
Purchase Payments, and then select the highest of those values. If the highest
of those values exceeds the existing Annual Income Amount, we replace the
existing amount with the new, higher amount. Otherwise, we leave the existing
Annual Income Amount intact. In later years, (i.e., after the first Annuity
Anniversary after the first withdrawal) we determine whether an automatic
step-up should occur on each Annuity Anniversary, by performing a similar
examination of the Account Values on the end of the four immediately preceding
quarters. At the time that we increase your Annual Income Amount, we also
increase your Protected Withdrawal Value to equal the highest quarterly value
upon which your step-up was based. If, on the date that we implement a Highest
Quarterly Auto Step-Up to your Annual Income Amount, the charge for Spousal
Highest Daily Lifetime Seven has changed for new purchasers, you may be
subject to the new charge at the time of such step-up. Prior to increasing
your charge for Spousal Highest Daily Lifetime Seven upon a step-up, we would
notify you, and give you the opportunity to cancel the automatic step-up
feature. If you receive notice of a proposed step-up and accompanying fee
increase, you should carefully evaluate whether the amount of the step-up
justifies the increased fee to which you will be subject.
The Spousal Highest Daily Lifetime Seven benefit does not affect your ability
to make withdrawals under your annuity, or limit your ability to request
withdrawals that exceed the Annual Income Amount. Under Spousal Highest Daily
Lifetime Seven, if your cumulative withdrawals in an Annuity Year are less
than or equal to the Annual Income Amount, they will not reduce your Annual
Income Amount in subsequent Annuity Years, but any such withdrawals will
reduce the Annual Income Amount on a dollar-for-dollar basis in that Annuity
Year.
If, cumulatively, you withdraw an amount less than the Annual Income Amount in
any Annuity Year, you cannot carry-over the unused portion of the Annual
Income Amount to subsequent Annuity Years.
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Examples of dollar-for-dollar and proportional reductions, and the Highest
Quarterly Auto Step-Up are set forth below. The values depicted here are
purely hypothetical, and do not reflect the charges for the Spousal Highest
Daily Lifetime Seven benefit or any other fees and charges. Assume the
following for all three examples:
.. The Issue Date is December 1, 2007
.. The Spousal Highest Daily Lifetime Seven benefit is elected on March 5,
2008.
.. The youngest Designated Life was 70 years old when he/she elected the
Spousal Highest Daily Lifetime Seven benefit.
DOLLAR-FOR-DOLLAR REDUCTIONS
On May 2, 2008, the Protected Withdrawal Value is $120,000, resulting in an
Annual Income Amount of $6,000 (since the youngest Designated Life is younger
than 80 at the time of the 1/st/ withdrawal, the Annual Income Amount is 5% of
the Protected Withdrawal Value, in this case 5% of $120,000). Assuming $2,500
is withdrawn from the Annuity on this date, the remaining Annual Income Amount
for that Annuity Year (up to and including December 1, 2008) is $3,500. This
is the result of a dollar-for-dollar reduction of the Annual Income Amount -
$6,000 less $2,500 = $3,500.
PROPORTIONAL REDUCTIONS
Continuing the previous example, assume an additional withdrawal of $5,000
occurs on August 6, 2008 and the Account Value at the time of this withdrawal
is $110,000. The first $3,500 of this withdrawal reduces the Annual Income
Amount for that Annuity Year to $0. The remaining withdrawal amount - $1,500 -
reduces the Annual Income Amount in future Annuity Years on a proportional
basis based on the ratio of the excess withdrawal to the Account Value
immediately prior to the excess withdrawal. (Note that if there were other
withdrawals in that Annuity Year, each would result in another proportional
reduction to the Annual Income Amount).
HERE IS THE CALCULATION:
Account Value before withdrawal $110,000.00
Less amount of "non" excess withdrawal $ 3,500.00
Account Value immediately before excess withdrawal of $1,500 $106,500.00
Excess withdrawal amount $ 1,500.00
Divided by Account Value immediately before excess withdrawal $106,500.00
Ratio 1.41%
Annual Income Amount $ 6,000.00
Less ratio of 1.41% $ 84.51
Annual Income Amount for future Annuity Years $ 5,915.49
HIGHEST QUARTERLY AUTO STEP-UP
On each Annuity Anniversary date, the Annual Income Amount is stepped-up if
the appropriate percentage (based on the youngest Designated Life's age on the
Annuity Anniversary) of the highest quarterly value since your first
withdrawal (or last Annuity Anniversary in subsequent years), adjusted for
withdrawals and additional Purchase Payments, is higher than the Annual Income
Amount, adjusted for excess withdrawals and additional Purchase Payments.
Continuing the same example as above, the Annual Income Amount for this
Annuity Year is $6,000. However, the excess withdrawal on August 6 reduces
this amount to $5,915.49 for future years (see above). For the next Annuity
Year, the Annual Income Amount will be stepped-up if 5% (since the youngest
Designated Life is younger than 80 on the date of the potential step-up) of
the highest quarterly Account Value adjusted for withdrawals, is higher than
$5,915.49. Here are the calculations for determining the quarterly values.
Only the June 1 value is being adjusted for excess withdrawals as the
September 1 and December 1 Valuation Days occur after the excess withdrawal on
August 6.
HIGHEST QUARTERLY VALUE
(ADJUSTED WITH ADJUSTED ANNUAL
WITHDRAWAL AND PURCHASE INCOME AMOUNT (5% OF THE
DATE* ACCOUNT VALUE PAYMENTS)** HIGHEST QUARTERLY VALUE)
----- ------------- ----------------------- ------------------------
June 1, 2008 $118,000.00 $118,000.00 $5,900.00
August 6, 2008 $110,000.00 $112,885.55 $5,644.28
September 1, 2008 $112,000.00 $112,885.55 $5,644.28
December 1, 2008 $119,000.00 $119,000.00 $5,950.00
* In this example, the Annuity Anniversary date is December 1. The quarterly
valuation dates are every three months thereafter -
March 1, June 1, September 1, and December 1. In this example, we do not
use the March 1 date as the first withdrawal took place after March 1. The
Annuity Anniversary Date of December 1 is considered the fourth and final
quarterly valuation date for the year.
** In this example, the first quarterly value after the first withdrawal is
$118,000 on June 1, yielding an adjusted Annual Income Amount of $5,900.00.
This amount is adjusted on August 6 to reflect the $5,000 withdrawal. The
calculations for the adjustments are:
. The Account Value of $118,000 on June 1 is first reduced
dollar-for-dollar by $3,500 ($3,500 is the remaining Total Annual Income
Amount for the Annuity Year), resulting in an adjusted Account Value of
$114,500 before the excess withdrawal.
. This amount ($114,500) is further reduced by 1.41% (this is the ratio in
the above example which is the excess withdrawal divided by the Account
Value immediately preceding the excess withdrawal) resulting in a
Highest Quarterly Value of $112,885.55.
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The adjusted Annual Income Amount is carried forward to the next quarterly
anniversary date of September 1. At this time, we compare this amount to 5% of
the Account Value on September 1. Since the June 1 adjusted Annual Income
Amount of $5,644.28 is higher than $5,600.00 (5% of $112,000), we continue to
carry $5,644.28 forward to the next and final quarterly anniversary date of
December 1. The Account Value on December 1 is $119,000 and 5% of this amount
is $5,950. Since this is higher than $5,644.28, the adjusted Annual Income
Amount is reset to $5,950.00.
In this example, 5% of the December 1 value yields the highest amount of
$5,950.00. Since this amount is higher than the current year's Annual Income
Amount of $5,915.49 adjusted for excess withdrawals, the Annual Income Amount
for the next Annuity Year, starting on December 2, 2008 and continuing through
December 1, 2009, will be stepped-up to $5,950.00.
BENEFITS UNDER THE SPOUSAL HIGHEST DAILY LIFETIME SEVEN BENEFIT
.. To the extent that your Account Value was reduced to zero as a result of
cumulative withdrawals that are equal to or less than the Annual Income
Amount or as a result of the fee that we assess for Spousal Highest Daily
Lifetime Seven, and amounts are still payable under Spousal Highest Daily
Lifetime Seven, we will make an additional payment, if any, for that
Annuity Year equal to the remaining Annual Income Amount for the Annuity
Year. Thus, in that scenario, the remaining Annual Income Amount would be
payable even though your Account Value was reduced to zero. In subsequent
Annuity Years we make payments that equal the Annual Income Amount as
described in this section. We will make payments until the death of the
first of the Designated Lives to die, and will continue to make payments
until the death of the second Designated Life as long as the Designated
Lives were spouses at the time of the first death. To the extent that
cumulative withdrawals in the current Annuity Year that reduced your
Account Value to zero are more than the Annual Income Amount, the Spousal
Highest Daily Lifetime Seven benefit terminates, and no additional payments
will be made. However, if a withdrawal in the latter scenario was taken to
meet required minimum distribution requirements under the Annuity, then the
benefit will not terminate, and we will continue to pay the Annual Income
Amount in the form of a fixed annuity.
.. If Annuity payments are to begin under the terms of your Annuity, or if you
decide to begin receiving Annuity payments and there is a Annual Income
Amount due in subsequent Annuity Years, you can elect one of the following
two options:
(1)apply your Account Value to any Annuity option available; or
(2)request that, as of the date Annuity payments are to begin, we make
Annuity payments each year equal to the Annual Income Amount. We will
make payments until the first of the Designated Lives to die, and
will continue to make payments until the death of the second
Designated Life as long as the Designated Lives were spouses at the
time of the first death. If, due to death of a Designated Life or
divorce prior to annuitization, only a single Designated Life
remains, then Annuity payments will be made as a life annuity for the
lifetime of the Designated Life.
We must receive your request in a form acceptable to us at our office.
In the absence of an election when mandatory annuity payments are to begin, we
will make annual annuity payments as a joint and survivor or single (as
applicable) life fixed annuity with ten payments certain, by applying the
greater of the annuity rates then currently available or the annuity rates
guaranteed in your Annuity. The amount that will be applied to provide such
Annuity payments will be the greater of:
(1)the present value of the future Annual Income Amount payments. Such
present value will be calculated using the greater of the joint and
survivor or single (as applicable) life fixed annuity rates then
currently available or the joint and survivor or single (as
applicable) life fixed annuity rates guaranteed in your Annuity; and
(2)the Account Value.
.. If no withdrawal was ever taken, we will calculate the Annual Income Amount
as if you made your first withdrawal on the date the annuity payments are
to begin.
.. Please note that payments that we make under this benefit after the Annuity
Anniversary coinciding with or next following the older of the owner or
Annuitant's 95/th/ birthday, will be treated as annuity payments.
OTHER IMPORTANT CONSIDERATIONS
.. Withdrawals under the Spousal Highest Daily Lifetime Seven benefit are
subject to all of the terms and conditions of the Annuity.
.. Withdrawals made while the Spousal Highest Daily Lifetime Seven Benefit is
in effect will be treated, for tax purposes, in the same way as any other
withdrawals under the Annuity. The Spousal Highest Daily Lifetime Seven
Benefit does not directly affect the Account Value or surrender value, but
any withdrawal will decrease the Account Value by the amount of the
withdrawal. If you surrender your Annuity you will receive the current
surrender value.
.. You can make withdrawals from your Annuity while your Account Value is
greater than zero without purchasing the Spousal Highest Daily Lifetime
Seven benefit. The Spousal Highest Daily Lifetime Seven benefit provides a
guarantee that if your Account Value declines due to market performance,
you will be able to receive your Annual Income Amount in the form of
periodic benefit payments.
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.. You should carefully consider when to begin taking withdrawals. If you
begin taking withdrawals early, you may maximize the time during which you
may take withdrawals due to longer life expectancy, and you will be using
an optional benefit for which you are paying a charge. On the other hand,
you could limit the value of the benefit if you begin taking withdrawals
too soon. For example, withdrawals reduce your Account Value and may limit
the potential for increasing your Protected Withdrawal Value. You should
discuss with your Financial Professional when it may be appropriate for you
to begin taking withdrawals.
.. Upon inception of the benefit and to maintain the benefit, 100% of your
Account Value must have been allocated to the permitted Sub-accounts.
.. You cannot allocate Purchase Payments or transfer Account Value to or from
the AST Investment Grade Bond Portfolio Sub-account (as described below) if
you elect this benefit. A summary description of the AST Investment Grade
Bond Portfolio appears within the prospectus section entitled "What Are The
Investment Objectives and Policies of The Portfolios?". You can find a copy
of the AST Investment Grade Bond Portfolio prospectus by going to
www.prudentialannuities.com.
.. You can make withdrawals from your Annuity without purchasing the Spousal
Highest Daily Lifetime Seven benefit. The Spousal Highest Daily Lifetime
Seven benefit provides a guarantee that if your Account Value declines due
to market performance, you will be able to receive your Annual Income
Amount in the form of periodic benefit payments.
.. Transfers to and from the elected Sub-accounts and the AST Investment Grade
Bond Portfolio Sub-account triggered by the mathematical formula component
of the benefit will not count toward the maximum number of free transfers
allowable under an Annuity.
.. You must allocate your Account Value in accordance with the then available
investment option(s) that we may prescribe in order to maintain the Spousal
Highest Daily Lifetime Seven benefit. If, subsequent to your election of
the benefit, we change our requirements for how Account Value must be
allocated under the benefit, we will not compel you to re-allocate your
Account Value in accordance with our newly adopted requirements. Subject to
any change in requirements, transfers of Account Value and allocation of
Additional Purchase Payments may be subject to new investment limitations.
.. The fee for Spousal Highest Daily Lifetime Seven is 0.75% annually of the
Protected Withdrawal Value. We deduct this fee at the end of each quarter,
where each such quarter is part of a year that begins on the effective date
of the benefit or an anniversary thereafter. Thus, on each such quarter-end
(or the next Valuation Day, if the quarter-end is not a Valuation Day), we
deduct 0.1875% of the Protected Withdrawal Value at the end of the quarter.
We deduct the fee pro rata from each of your Sub-accounts including the AST
Investment Grade Bond Sub-account. Since this fee is based on the Protected
Withdrawal Value, the fee for Spousal Highest Daily Lifetime Seven may be
greater than it would have been, had it been based on the Account Value
alone. If the fee to be deducted exceeds the current Account Value, we will
reduce the Account Value to zero, and continue the benefit as described
above. You will begin paying the charge for this benefit as of the
effective date of the benefit, even if you do not begin taking withdrawals
for many years, or ever. We will not refund the charges you have paid if
you choose never to take any withdrawals and/or if you never receive any
lifetime income payments.
.. The Basic Death Benefit will terminate if withdrawals taken under the
Spousal Highest Daily Lifetime Seven benefit cause your Account Value to
reduce to zero. Certain optional Death Benefits may terminate if
withdrawals taken under the Spousal Highest Daily Lifetime Seven benefit
cause your Account Value to reduce to zero. (See "Death Benefit" for more
information.)
ELECTION OF AND DESIGNATIONS UNDER THE BENEFIT.
We no longer permit new elections of Spousal Highest Daily Lifetime Seven.
Elections of Spousal Highest Daily Lifetime Seven must have been based on two
Designated Lives. Designated Lives must be natural persons who are each
other's spouses at the time of election of the benefit and at the death of the
first of the Designated Lives to die. Spousal Highest Daily Lifetime Seven
could only be elected where the Owner, Annuitant, and Beneficiary designations
are as follows:
.. One Annuity Owner, where the Annuitant and the Owner are the same person
and the beneficiary is the Owner's spouse. The Owner/Annuitant and the
beneficiary each must be at least 59 1/2 years old at the time of election;
or
.. Co-Annuity Owners, where the Owners are each other's spouses. The
beneficiary designation must be the surviving spouse, or the spouses named
equally. One of the owners must be the Annuitant. Each Owner must each be
at least 59 1/2 years old at the time of election; or
.. One Annuity Owner, where the Owner is a custodial account established to
hold retirement assets for the benefit of the Annuitant pursuant to the
provisions of Section 408(a) of the Internal Revenue Code (or any successor
Code section thereto) ("Custodial Account"), the beneficiary is the
Custodial Account, and the spouse of the Annuitant is the Contingent
Annuitant. Both the Annuitant and the Contingent Annuitant each must be at
least 59 1/2 years old at the time of election.
We do not permit a change of Owner under this benefit, except as follows:
(a)if one Owner dies and the surviving spousal Owner assumes the Annuity or
(b)if the Annuity initially is co-owned, but thereafter the Owner who is not
the Annuitant is removed as Owner. We permit changes of beneficiary under
this benefit. If the Designated Lives divorce, the Spousal Highest Daily
Lifetime Seven benefit may not be divided as part of the divorce settlement
or judgment. Nor may the divorcing spouse who retains ownership of the
Annuity appoint a new Designated Life upon re-marriage.
Spousal Highest Daily Lifetime Seven can be elected at the time that you
purchase your Annuity or after the Issue Date, if available.
If you wish, you may cancel any Spousal Highest Daily Lifetime Seven benefit.
You may then elect any other available living benefit on any Valuation Day
after you have cancelled the Spousal Highest Daily Lifetime Seven benefit,
provided the request is
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received in good order (subject to state availability and any applicable age
requirements). Upon cancellation of any Spousal Highest Daily Lifetime Seven
benefit, any Account Value allocated to the AST Investment Grade Bond
Portfolio Sub-account used with the formula will be reallocated to the
Permitted Sub-Accounts according to your most recent allocation instruction or
in absence of such instruction, pro-rata. You should be aware that upon
termination of Spousal Highest Daily Lifetime Seven, you will lose the
Protected Withdrawal Value (including the Tenth Anniversary Date Guarantee),
Annual Income Amount, and the Return of Principal Guarantee that you had
accumulated under the benefit. Thus, the initial guarantees under any
newly-elected benefit will be based on your current Account Value. ONCE THE
SPOUSAL HIGHEST DAILY LIFETIME SEVEN BENEFIT IS CANCELLED YOU ARE NOT REQUIRED
TO RE-ELECT ANOTHER OPTIONAL LIVING BENEFIT AND ANY SUBSEQUENT BENEFIT
ELECTION MAY BE MADE ON OR AFTER THE FIRST VALUATION DAY FOLLOWING THE
CANCELLATION OF THE SPOUSAL HIGHEST DAILY LIFETIME SEVEN BENEFIT PROVIDED THAT
THE BENEFIT YOU ARE LOOKING TO ELECT IS AVAILABLE ON A POST-ISSUE BASIS. ANY
SUCH NEW BENEFIT MAY BE MORE EXPENSIVE.
RETURN OF PRINCIPAL GUARANTEE
If you have not made a withdrawal before the Tenth Anniversary, we will
increase your Account Value on that Tenth Anniversary (or the next Valuation
Day, if that anniversary is not a Valuation Day), if the requirements set
forth in this paragraph are met. On the Tenth Anniversary, we add:
a) your Account Value on the day that you elected Spousal Highest Daily
Lifetime Seven; and
b) the sum of each Purchase Payment you made during the one-year period after
you elected the benefit.
If the sum of (a) and (b) is greater than your Account Value on the Tenth
Anniversary, we increase your Account Value to equal the sum of (a) and (b),
by contributing funds from our general account. If the sum of (a) and (b) is
less than or equal to your Account Value on the Tenth Anniversary, we make no
such adjustment. The amount that we add to your Account Value under this
provision will be allocated to each of your variable investment options
(including the a bond Sub-account used with this benefit), in the same
proportion that each such Sub-account bears to your total Account Value,
immediately before the application of the amount. Any such amount will not be
considered a Purchase Payment when calculating your Protected Withdrawal
Value, your death benefit, or the amount of any optional benefit that you may
have selected, and therefore will have no direct impact on any such values at
the time we add this amount. This potential addition to Account Value is
available only if you have elected Spousal Highest Daily Lifetime Seven and if
you meet the conditions set forth in this paragraph. Thus, if you take a
withdrawal prior to the Tenth Anniversary, you are not eligible to receive the
Return of Principal Guarantee.
TERMINATION OF THE BENEFIT
You may terminate the benefit at any time by notifying us. If you terminate
the benefit, any guarantee provided by the benefit will terminate as of the
date the termination is effective, and certain restrictions on re-election
will apply as described above. The benefit terminates: (i) if upon the death
of the first Designated Life, the surviving Designated Life opts to take the
death benefit under the Annuity (thus, the benefit does not terminate solely
because of the death of the first Designated Life) (ii) upon the death of the
second Designated Life, (iii) upon your termination of the benefit (although
if you have elected to take annuity payments in the form of the Annual Income
Amount, we will continue to pay the Annual Income Amount) (iv) upon your
surrender of the Annuity (v) upon your election to begin receiving annuity
payments (vi) if both the Account Value and Annual Income Amount equal zero or
(vii) if you cease to meet our requirements for issuing the benefit (see
Election of and Designations under the Benefit).
Upon termination of Spousal Highest Daily Lifetime Seven other than upon death
of a Designated Life, we impose any accrued fee for the benefit (i.e., the fee
for the pro-rated portion of the year since the fee was last assessed), and
thereafter we cease deducting the charge for the benefit. With regard to your
investment allocations, upon termination we will: (i) leave intact amounts
that are held in the variable investment options, and (ii) transfer all
amounts held in the AST Investment Grade Bond Portfolio Sub-account (as
defined below) to your variable investment options, based on your existing
allocation instructions or (in the absence of such existing instructions) pro
rata (i.e. in the same proportion as the current balances in your variable
investment options).
MATHEMATICAL FORMULA COMPONENT OF SPOUSAL HIGHEST DAILY LIFETIME SEVEN
As indicated above, we limit the Sub-accounts to which you may allocate
Account Value if you have elected Spousal Highest Daily Lifetime Seven. For
purposes of the benefit, we refer to those permitted Sub-accounts as the
"Permitted Sub-accounts". As a requirement of participating in Spousal Highest
Daily Lifetime Seven, we require that you participate in our specialized
program, under which we may transfer Account Value between the Permitted
Sub-accounts and a specified bond fund within the Advanced Series Trust (the
"AST Investment Grade Bond Sub-account"). We determine whether to make a
transfer, and the amount of any transfer, under a non-discretionary formula,
discussed below. The AST Investment Grade Bond Sub-account is available only
with this benefit, and thus you may not allocate purchase payments to the AST
Investment Grade Bond Sub-account. Under the formula component of Spousal
Highest Daily Lifetime Seven, we monitor your Account Value daily and, if
dictated by the formula, systematically transfer amounts between the Permitted
Sub-accounts you have chosen and the AST Investment Grade Bond Sub-account.
Any transfer would be made in accordance with a formula, which is set forth in
Appendix K to this prospectus.
Speaking generally, the formula, which we apply each Valuation Day, operates
as follows. The formula starts by identifying an income basis for that day and
then multiplies that figure by 5%, to produce a projected (i.e., hypothetical)
income amount. Note that we use 5% in the formula, irrespective of the
Annuitant's attained age. Then we produce an estimate of the total amount we
137
would target in our allocation model, based on the projected income amount and
factors set forth in the formula. In the formula, we refer to that value as
the "Target Value" or "L". If you have already made a withdrawal, your
projected income amount (and thus your Target Value) would take into account
any automatic step-up, any subsequent purchase payments, and any excess
withdrawals. Next, the formula subtracts from the Target Value the amount held
within the AST Investment Grade Bond Sub-account on that day, and divides that
difference by the amount held within the Permitted Sub-accounts. That ratio,
which essentially isolates the amount of your Target Value that is not offset
by amounts held within the AST Investment Grade Bond Sub-account, is called
the "Target Ratio" or "r". If the Target Ratio exceeds a certain percentage
(currently 83%), it means essentially that too much Target Value is not offset
by assets within the AST Investment Grade Bond Sub-account, and therefore we
will transfer an amount from your Permitted Sub-accounts to the AST Investment
Grade Bond Sub-account. Conversely, if the Target Ratio falls below a certain
percentage (currently 77%), then a transfer from the AST Investment Grade Bond
Sub-account to the Permitted Sub-accounts would occur.
If you elect the new formula (90% Cap Feature), see discussion regarding that
feature.
As you can glean from the formula, poor investment performance of your Account
Value may result in a transfer of a portion of your variable Account Value to
the AST Investment Grade Bond Sub-account because such poor investment
performance will tend to increase the Target Ratio. Moreover, "flat"
investment returns of your Account Value over a period of time also could
result in the transfer of your Account Value from the Permitted Sub-accounts
to the AST Investment Grade Bond Sub-account. Because the amount allocated to
the AST Investment Grade Bond Sub-account and the amount allocated to the
Permitted Sub-accounts each is a variable in the formula, the investment
performance of each affects whether a transfer occurs for your Annuity. In
deciding how much to transfer, we use another formula, which essentially seeks
to re-balance amounts held in the Permitted Sub-accounts and the AST
Investment Grade Bond Sub-account so that the Target Ratio meets a target,
which currently is equal to 80%. Once you elect Spousal Highest Daily Lifetime
Seven, the ratios we use will be fixed. For newly-issued Annuities that elect
Spousal Highest Daily Lifetime Seven and existing Annuities that elect Spousal
Highest Daily Lifetime Seven, however, we reserve the right, subject to any
required regulatory approval, to change the ratios.
While you are not notified when your Annuity reaches a reallocation trigger,
you will receive a confirmation statement indicating the transfer of a portion
of your Account Value either to or from the AST Investment Grade Bond
Sub-account. The formula by which the reallocation triggers operate is
designed primarily to mitigate the financial risks that we incur in providing
the guarantee under Spousal Highest Daily Lifetime Seven.
Depending on the results of the calculation relative to the reallocation
triggers, we may, on any day:
.. Not make any transfer between the Permitted Sub-accounts and the AST
Investment Grade Bond Sub-account; or
.. If a portion of your Account Value was previously allocated to the AST
Investment Grade Bond Sub-account, transfer all or a portion of those
amounts to the Permitted Sub-accounts, based on your existing allocation
instructions or (in the absence of such existing instructions) pro rata
(i.e., in the same proportion as the current balances in your variable
investment options); or
.. Transfer all or a portion of your Account Value in the Permitted
Sub-accounts pro rata to the AST Investment Grade Bond Sub-account.
Therefore, at any given time, some, none, or all of your Account Value may be
allocated to the AST Investment Grade Bond Sub-account. If your entire Account
Value is transferred to the AST Investment Grade Bond Sub-account, then based
on the way the formula operates, the formula will not transfer amounts out of
the AST Investment Grade Bond Sub-account to the Permitted Sub-accounts and
the entire Account Value would remain in the AST Investment Grade Bond
Sub-account. If you make additional purchase payments to your Annuity, they
will be allocated to the Sub-accounts according to your allocation
instructions. Such additional purchase payments may or may not cause the
formula to transfer money in or out of the AST Investment Grade Bond
Sub-account. Once the purchase payments are allocated to your Annuity, they
will also be subject to the formula, which may result in immediate transfers
to or from the AST Investment Grade Bond Sub-accounts, if dictated by the
formula. The amounts of any such transfers will vary as dictated by the
formula, and will depend on the factors listed below.
Prior to the first withdrawal, the primary driver of transfers to the AST
Investment Grade Bond Sub-account is difference between your Account Value and
your Protected Withdrawal Value. If none of your Account Value is allocated to
the AST Investment Grade Bond Sub-account, then over time the formula permits
an increasing difference between the Account Value and the Protected
Withdrawal Value before a transfer to the AST Investment Grade Bond
Sub-account occurs. Therefore, as time goes on, while none of your Account
Value is allocated to the AST Investment Grade Bond Sub-account, the smaller
the difference between the Protected Withdrawal Value and the Account Value,
the more the Account Value can decrease prior to a transfer to the AST
Investment Grade Bond Sub-account.
Each market cycle is unique, therefore the performance of your Sub-accounts,
and its impact on your Account Value, will differ from market cycle to market
cycle producing different transfer activity under the formula. The amount and
timing of transfers to and from the AST Investment Grade Bond Sub-account
pursuant to the formula depend on various factors unique to your Annuity and
are not necessarily directly correlated with the securities markets, bond
markets, interest rates or any other market or index.
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Some of the factors that determine the amount and timing of transfers (as
applicable to your Annuity), include:
.. The difference between your Account Value and your Protected Withdrawal
Value;
.. The amount of time Spousal Highest Daily Lifetime Seven has been in effect
on your Annuity;
.. The amount allocated to and the performance of the Permitted Sub-accounts
and the AST Investment Grade Bond Sub-account;
.. Any additional Purchase Payments you make to your Annuity (while the
benefit is in effect); and
.. Any withdrawals you take from your Annuity (while the benefit is in effect).
Because the amount allocated to the AST Investment Grade Bond Sub-account and
the amount allocated to the Permitted Sub-accounts each is a variable in the
formula, the investment performance of each affects whether a transfer occurs
for your Annuity. The greater the amounts allocated to either the AST
Investment Grade Bond Sub-account or to the Permitted Sub-accounts, the
greater the impact performance of those investments have on your Account Value
and thus the greater the impact on whether (and how much) your Account Value
is transferred to or from the AST Investment Grade Bond Sub-account. It is
possible, under the formula, that if a significant portion of your Account
Value is allocated to the AST Investment Grade Bond Sub-account and that
Sub-account has positive performance, the formula might transfer a portion of
your Account Value to the Permitted Sub-accounts, even if the performance of
your Permitted Sub-accounts is negative. Conversely, if a significant portion
of your Account Value is allocated to the AST Investment Grade Bond
Sub-account and that Sub-account has negative performance, the formula may
transfer additional amounts from your Permitted Sub-accounts to the AST
Investment Grade Bond Sub-account even if the performance of your Permitted
Sub-accounts is positive.
If you make additional Purchase Payments to your Annuity, they will be
allocated in accordance with your Annuity. Once allocated, they will also be
subject to the formula described above and therefore may be transferred to the
AST Investment Grade Bond Sub-account, if dictated by the formula.
Any Account Value in the AST Investment Grade Bond Sub-account will not
participate in the positive or negative investment experience of the Permitted
Sub-accounts until it is transferred out of the AST Investment Grade Bond
Sub-account.
ADDITIONAL TAX CONSIDERATIONS
If you purchase an annuity as an investment vehicle for "qualified"
investments, including an IRA, SEP-IRA, Tax Sheltered Annuity (or 403(b)) or
employer plan under Code Section 401(a), the Required Minimum Distribution
rules under the Code provide that you begin receiving periodic amounts from
your annuity beginning after age 70 1/2. For a Tax Sheltered Annuity or a
401(a) plan for which the participant is not a greater than five (5) percent
owner of the employer, this required beginning date can generally be deferred
to retirement, if later. Roth IRAs are not subject to these rules during the
owner's lifetime. The amount required under the Code may exceed the Annual
Income Amount, which will cause us to increase the Annual Income Amount in any
Annuity Year that Required Minimum Distributions due from your Annuity are
greater than such amounts. In addition, the amount and duration of payments
under the annuity payment and death benefit provisions may be adjusted so that
the payments do not trigger any penalty or excise taxes due to tax
considerations such as Required Minimum Distribution provisions under the tax
law. Please note, however, that any withdrawal you take prior to the Tenth
Anniversary, even if withdrawn to satisfy required minimum distribution rules,
will cause you to lose the ability to receive the Return of Principal
Guarantee and the guaranteed amount described above under "Key Feature -
Protected Withdrawal Value".
As indicated, withdrawals made while this benefit is in effect will be
treated, for tax purposes, in the same way as any other withdrawals under the
Annuity. Please see the Tax Considerations section of the prospectus for a
detailed discussion of the tax treatment of withdrawals. We do not address
each potential tax scenario that could arise with respect to this benefit
here. However, we do note that if you participate in Spousal Highest Daily
Lifetime Seven through a non-qualified annuity, as with all withdrawals, once
all Purchase Payments are returned under the Annuity, all subsequent
withdrawal amounts will be taxed as ordinary income.
SPOUSAL HIGHEST DAILY LIFETIME SEVEN WITH BENEFICIARY INCOME OPTION/SM/
There was an optional death benefit feature under this benefit, the amount of
which is linked to your Annual Income Amount. You may have chosen Spousal
Highest Daily Lifetime Seven without also selecting the Beneficiary Income
Option death benefit ("BIO"). We no longer permit elections of Spousal Highest
Daily Lifetime Seven with BIO. If you terminate your Spousal Highest Daily
Lifetime Seven benefit with BIO to elect any other available living benefit,
you will lose all guarantees under the Spousal Highest Daily Lifetime Seven
benefit with BIO, and will begin new guarantees under the newly elected
benefit based on the Account Value as of the date the new benefit becomes
active.
If you elected the Beneficiary Income Option death benefit, you may not elect
any other optional benefit. You could elect the Beneficiary Income Option
death benefit so long as each Designated Life was no older than age 75 at the
time of election. This death benefit is not transferable in the event of a
divorce, nor may the benefit be split in accordance with any divorce
proceedings or similar instrument of separation. Since this fee is based on
the Protected Withdrawal Value, the fee for Spousal Highest Daily Lifetime
Seven with BIO may be greater than it would have been, had it been based on
the Account Value alone.
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For purposes of the Beneficiary Income Option death benefit, we calculate the
Annual Income Amount and Protected Withdrawal Value in the same manner that we
do under Spousal Highest Daily Lifetime Seven itself. Upon the first death of
a Designated Life, no amount is payable under the Beneficiary Income Option
death benefit. Upon the second death of a Designated Life, we identify the
following amounts: (a) the amount of the base death benefit under the Annuity
(b) the Protected Withdrawal Value and (c) the Annual Income Amount. If there
were no withdrawals prior to the date of death, then we calculate the
Protected Withdrawal Value for purposes of this death benefit as of the date
of death, and we calculate the Annual Income Amount as if there were a
withdrawal on the date of death. If there were withdrawals prior to the date
of death, then we set the Protected Withdrawal Value and Annual Income Amount
for purposes of this death benefit as of the date that we receive due proof of
death.
If there is one beneficiary, he/she must choose to receive either the base
death benefit (in a lump sum or other permitted form of distribution) or the
Beneficiary Income Option death benefit (in the form of annual payment of the
Annual Income Amount - such payments may be annual or at other intervals that
we permit). If there are multiple beneficiaries, each beneficiary is presented
with the same choice. Thus, each beneficiary can choose to take his/her
portion of either (a) the basic death benefit or (b) the Beneficiary Income
Option death benefit. In order to receive the Beneficiary Income Option death
benefit, each beneficiary's share of the death benefit proceeds must be
allocated as a percentage of the total death benefit to be paid. We allow a
beneficiary who has opted to receive the Annual Income Amount to designate
another beneficiary, who would receive any remaining payments upon the former
beneficiary's death. Note also that the final payment, exhausting the
Protected Withdrawal Value, may be less than the Annual Income Amount.
Here is an example to illustrate how the death benefit may be paid:
.. Assume that (i) the basic death benefit is $50,000, the Protected
Withdrawal Value is $100,000, and the Annual Income Amount is $5,000;
(ii) there are two beneficiaries (the first designated to receive 75% of
the death benefit and the second designated to receive 25% of the death
benefit); (iii) the first beneficiary chooses to receive his/her portion of
the death benefit in the form of the Annual Income Amount, and the second
beneficiary chooses to receive his/her portion of the death benefit with
reference to the basic death benefit.
.. Under those assumptions, the first beneficiary will be paid a pro-rated
portion of the Annual Income Amount for 20 years (the 20 year pay out
period is derived from the $5,000 Annual Income Amount, paid each year
until it exhausts the entire $100,000 Protected Withdrawal Value).
The pro-rated portion of the Annual Income Amount equal to $3,750 (i.e., the
first beneficiary's 75% share multiplied by $5,000) is then paid each year for
the 20 year period. Payment of $3,750 for 20 years results in total payments
of $75,000 (i.e., the first beneficiary's 75% share of the $100,000 Protected
Withdrawal Value).
The second beneficiary would receive 25% of the basic death benefit amount (or
$12,500).
If you elect to terminate Spousal Highest Daily Lifetime Seven with
Beneficiary Income Option, both Spousal Highest Daily Lifetime Seven and that
death benefit option will be terminated. You may not terminate the death
benefit option without terminating the entire benefit. If you terminate
Spousal Highest Daily Lifetime Seven with Beneficiary Income Option, your
ability to elect other optional living benefits will be affected as indicated
in the "Election of and Designations under the Benefit" section, above.
OPTIONAL 90% CAP FEATURE FOR THE FORMULA FOR SPOUSAL HIGHEST DAILY LIFETIME
SEVEN
If you currently own an Annuity and have elected, the Spousal Highest Daily
Lifetime Seven Income Benefit (including Spousal Highest Daily Lifetime Seven
with Beneficiary Income Option), you can elect this feature which utilizes a
new formula. The new formula is described below and will replace the "Transfer
Calculation" portion of the formula currently used in connection with your
benefit on a prospective basis. There is no cost to adding this feature to
your Annuity. This election may only be made once and may not be revoked once
elected. The new formula is found in Appendix K (K-4) of this prospectus. Only
the election of the 90% cap will prevent all of your Account Value from being
allocated to the AST Investment Grade Bond Portfolio Sub-account. If all of
your Account Value is currently allocated to the AST Investment Grade Bond
Portfolio Sub-account, it will not transfer back to the Permitted Sub-accounts
unless you elect the 90% Cap feature. If you make additional Purchase
Payments, they may or may not result in a transfer to or from the AST
Investment Grade Bond Portfolio Sub-account.
Under the new formula, the formula will not execute a transfer to the AST
Investment Grade Bond Sub-account that results in more than 90% of your
Account Value being allocated to the AST Investment Grade Bond Sub-account
("90% cap" or "90% Cap Rule"). Thus, on any Valuation Day, if the formula
would require a transfer to the AST Investment Grade Bond Sub-account that
would result in more than 90% of the Account Value being allocated to the AST
Investment Grade Bond Sub-account, only the amount that results in exactly 90%
of the Account Value being allocated to the AST Investment Grade Bond
Sub-account will be transferred. Additionally, future transfers into the AST
Investment Grade Bond Sub-account will not be made (regardless of the
performance of the AST Investment Grade Bond Sub-account and the Permitted
Sub-accounts) at least until there is first a transfer out of the AST
Investment Grade Bond Sub-account. Once this transfer occurs out of the AST
Investment Grade Bond Sub-account, future amounts may be transferred to or
from the AST Investment Grade Bond Sub-account if dictated by the formula
(subject to the 90% cap). At no time will the formula make a transfer to the
AST Investment Grade Bond Sub-account that results
140
in greater than 90% of your Account Value being allocated to the AST
Investment Grade Bond Sub-account. HOWEVER, IT IS POSSIBLE THAT, DUE TO THE
INVESTMENT PERFORMANCE OF YOUR ALLOCATIONS IN THE AST INVESTMENT GRADE BOND
SUB-ACCOUNT AND YOUR ALLOCATIONS IN THE PERMITTED SUB-ACCOUNTS YOU HAVE
SELECTED, YOUR ACCOUNT VALUE COULD BE MORE THAN 90% INVESTED IN THE AST
INVESTMENT GRADE BOND SUB-ACCOUNT.
If you make additional purchase payments to your Annuity while the 90% cap is
in effect, the formula will not transfer any of such additional purchase
payments to the AST Investment Grade Bond Sub-account at least until there is
first a transfer out of the AST Investment Grade Bond Sub-account, regardless
of how much of your Account Value is in the Permitted Sub-accounts. This means
that there could be scenarios under which, because of the additional purchase
payments you make, less than 90% of your entire Account Value is allocated to
the AST Investment Grade Bond Sub-account, and the formula will still not
transfer any of your Account Value to the AST Investment Grade Bond
Sub-account (at least until there is first a transfer out of the AST
Investment Grade Bond Sub-account). For example,
.. March 19, 2009 - a transfer is made that results in the 90% cap being met
and now $90,000 is allocated to the AST Investment Grade Bond Sub-account
and $10,000 is allocated to the Permitted Sub-accounts.
.. March 20, 2009 - you make an additional purchase payment of $10,000. No
transfers have been made from the AST Investment Grade Bond Sub-account to
the Permitted Sub-accounts since the cap went into effect on March 19, 2009.
.. As of March 20, 2009 (and at least until first a transfer is made out of
the AST Investment Grade Bond Sub-account under the formula) - the $10,000
payment is allocated to the Permitted Sub-accounts and now you have 82% in
the AST Investment Grade Bond Sub-account and 18% in the Permitted
Sub-accounts (such that $20,000 is allocated to the Permitted Sub-accounts
and $90,000 is allocated to the AST Investment Grade Bond Sub-account).
.. Once there is a transfer out of the AST Investment Grade Bond Sub-account
(of any amount), the formula will operate as described above, meaning that
the formula could transfer amounts to or from the AST Investment Grade Bond
Sub-account if dictated by the formula (subject to the 90% cap).
In the event that more than ninety percent (90%) of your Account Value is
allocated to the AST Investment Grade Bond Sub-account and you have elected
this feature, up to ten percent (10%) of your Account Value currently
allocated to the AST Investment Grade Bond Sub-account will be transferred to
your Permitted Sub-accounts, such that after the transfer, 90% of your Account
Value on the date of the transfer is in the AST Investment Grade Bond
Sub-account. The transfer to the Permitted Sub-accounts will be based on your
existing allocation instructions or (in the absence of such existing
instructions) pro rata (i.e., in the same proportion as the current balances
in your variable investment options). It is possible that additional transfers
might occur after this initial transfer if dictated by the formula. The
amounts of such additional transfer(s) will vary. If on the date this feature
is elected 100% of your Account Value is allocated to the AST Investment Grade
Bond Sub-account, a transfer of an amount equal to 10% of your Account Value
will be made to your Permitted Sub-accounts. WHILE THERE ARE NO ASSURANCES
THAT FUTURE TRANSFERS WILL OCCUR, IT IS POSSIBLE THAT AN ADDITIONAL
TRANSFER(S) TO THE PERMITTED SUB-ACCOUNTS COULD OCCUR FOLLOWING THE VALUATION
DAY(S), AND IN SOME INSTANCES (BASED ON THE FORMULA) THE ADDITIONAL
TRANSFER(S) COULD BE LARGE.
Once the 90% cap rule is met, future transfers into the AST Investment Grade
Bond Sub-account will not be made (regardless of the performance of the AST
Investment Grade Bond Sub-account and the Permitted Sub-accounts) at least
until there is first a transfer out of the AST Investment Grade Bond
Sub-account. Once this transfer occurs out of the AST Investment Grade Bond
Sub-account, future amounts may be transferred to or from the AST Investment
Grade Bond Sub-account if dictated by the formula (subject to the 90% cap).
IMPORTANT CONSIDERATIONS WHEN ELECTING THE NEW FORMULA:
.. At any given time, some, most or none of your Account Value may be
allocated to the AST Investment Grade Bond Sub-account.
.. Please be aware that because of the way the 90% cap formula operates, it is
possible that more than or less than 90% of your Account Value may be
allocated to the AST Investment Grade Bond Sub-account.
.. If this feature is elected, any Account Value transferred to the Permitted
Sub-accounts is subject to the investment performance of those
Sub-accounts. Your Account Value can go up or down depending of the
performance of the Permitted Sub-accounts you select.
HIGHEST DAILY LIFETIME 7 PLUS/SM/ INCOME BENEFIT (HD 7 PLUS)/SM/
Highest Daily Lifetime 7 Plus is no longer offered for new elections. If you
elected Highest Daily Lifetime 7 Plus and subsequently terminate the benefit,
you may elect any living benefit, subject to our current rules. See "Election
of and Designations under the Benefit" and "Termination of Existing Benefits
and Election of New Benefits" below for details. Please note that if you
terminate Highest Daily Lifetime 7 Plus and elect another available living
benefit, you lose the guarantees that you had accumulated under your existing
benefit and we will base any guarantees under the new benefit on your Account
Value as of the date the new benefit becomes active. The income benefit under
Highest Daily Lifetime 7 Plus currently is based on a single "designated life"
who is at least 45 years old on the date that the benefit was elected. The
Highest Daily Lifetime 7 Plus Benefit was not available if you elected any
other optional living benefit, although you may elect any optional death
benefit other than the Plus 40 life insurance rider and Highest Daily Value
death benefit. As long as your Highest Daily Lifetime 7 Plus Benefit is in
effect, you must allocate your Account Value in accordance with the then
permitted and available investment option(s) with this benefit. For a more
detailed description of the permitted investment options, see the "Investment
Options" section in this prospectus.
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Highest Daily Lifetime 7 Plus guarantees until the death of the single
designated life (the Annuitant) the ability to withdraw an annual amount (the
"Annual Income Amount") equal to a percentage of an initial principal value
(the "Protected Withdrawal Value") regardless of the impact of Sub-account
performance on the Account Value, subject to our rules regarding the timing
and amount of withdrawals. You are guaranteed to be able to withdraw the
Annual Income Amount for the rest of your life ("Lifetime Withdrawals"),
provided that you have not made "excess withdrawals" That have resulted in
your Account Value being reduced to zero. We also permit you to make a
one-time Non-Lifetime Withdrawal from your Annuity prior to taking Lifetime
Withdrawals under the benefit. Highest Daily Lifetime 7 Plus may be
appropriate if you intend to make periodic withdrawals from your Annuity, and
wish to ensure that Sub-account performance will not affect your ability to
receive annual payments. You are not required to make withdrawals as part of
the benefit - the guarantees are not lost if you withdraw less than the
maximum allowable amount each year under the rules of the benefit. As
discussed below, we require that you participate in our pre-determined
mathematical formula in order to participate in Highest Daily Lifetime 7 Plus.
Withdrawals are taken first from your own Account Value. We are only required
to begin making lifetime income payments to you under our guarantee when and
if your Account Value is reduced to zero (unless the benefit has terminated).
Although you are guaranteed the ability to withdraw your Annual Income Amount
for life even if your Account Value falls to zero, if you take an excess
withdrawal that brings your Account Value to zero, it is possible that your
Annual Income Amount could also fall to zero. In that scenario, no further
amount would be payable under the Highest Daily Lifetime 7 Plus benefit.
KEY FEATURE - PROTECTED WITHDRAWAL VALUE
The Protected Withdrawal Value is used to calculate the initial Annual Income
Amount. The Protected Withdrawal Value is separate from your Account Value and
not available as cash or a lump sum. On the effective date of the benefit, the
Protected Withdrawal Value is equal to your Account Value. On each Valuation
Day thereafter until the date of your first Lifetime Withdrawal (excluding any
Non-Lifetime Withdrawal discussed below), the Protected Withdrawal Value is
equal to the "Periodic Value" described in the next paragraphs.
The "Periodic Value" initially is equal to the Account Value on the effective
date of the benefit. On each Valuation Day thereafter until the first Lifetime
Withdrawal, we recalculate the Periodic Value. We stop determining the
Periodic Value upon your first Lifetime Withdrawal after the effective date of
the benefit. On each Valuation Day (the "Current Valuation Day"), the Periodic
Value is equal to the greater of:
(1)the Periodic Value for the immediately preceding business day (the "Prior
Valuation Day") appreciated at the daily equivalent of 7% annually during
the calendar day(s) between the Prior Valuation Day and the Current
Valuation Day (i.e., one day for successive Valuation Days, but more than
one calendar day for Valuation Days that are separated by weekends and/or
holidays), plus the amount of any adjusted Purchase Payment made on the
Current Valuation Day (the Periodic Value is proportionally reduced for any
Non-Lifetime Withdrawal); and
(2)the Account Value.
If you have not made a Lifetime Withdrawal on or before the 10/th/, 20/th/, or
25/th/ Anniversary of the effective date of the benefit, your Periodic Value
on the 10/th/, 20/th/, or 25/th/ Anniversary of the benefit effective date is
equal to the greater of:
(1)the Periodic Value described above or,
(2)the sum of (a), (b) and (c) below (proportionally reduced for any
Non-Lifetime Withdrawals):
(a)200% (on the 10/th/ anniversary), 400% (on the 20/th/ anniversary) or
600% (on the 25/th/ anniversary) of the Account Value on the effective
date of the benefit;
(b)200% (on the 10/th/ anniversary), 400% (on the 20/th/ anniversary) or
600% (on the 25/th/ anniversary) of all adjusted Purchase Payments made
within one year following the effective date of the benefit; and
(c)all adjusted Purchase Payments made after one year following the
effective date of the benefit.
If you elected Highest Daily Lifetime 7 Plus with Beneficiary Income Option
("BIO") (see below), we will stop determining the Periodic Value (as described
above) on the earlier of your first Lifetime Withdrawal after the effective
date of the benefit or the Tenth Anniversary of the effective date of the
benefit ("Tenth Anniversary"). This means that under the Highest Daily
Lifetime 7 Plus with BIO benefit you will not be eligible for the guaranteed
minimum Periodic Values described above on the 20/th/ and 25/th/ Anniversary
of the Benefit Effective Date.
On and after the date of your first Lifetime Withdrawal, your Protected
Withdrawal Value is increased by the amount of any subsequent Purchase
Payments, is reduced by withdrawals, including your first Lifetime Withdrawal
(as described below), and may be increased if you qualify for a step-up (as
described below).
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RETURN OF PRINCIPAL GUARANTEE
If you have not made a Lifetime Withdrawal before the Tenth Anniversary, we
will increase your Account Value on that Tenth Anniversary (or the next
Valuation Day, if that anniversary is not a Valuation Day), if the
requirements set forth in this paragraph are met. On the Tenth Anniversary, we
add:
a) your Account Value on the day that you elected Highest Daily Lifetime 7
Plus proportionally reduced for any Non-Lifetime Withdrawal; and
b) the sum of each Purchase Payment proportionally reduced for any subsequent
Non-Lifetime Withdrawal you made during the one-year period after you
elected the benefit.
If the sum of (a) and (b) is greater than your Account Value on the Tenth
Anniversary, we increase your Account Value to equal the sum of (a) and (b),
by contributing funds from our general account. If the sum of (a) and (b) is
less than or equal to your Account Value on the Tenth Anniversary, we make no
such adjustment. The amount that we add to your Account Value under this
provision will be allocated to each of your variable investment options
(including the AST Investment Grade Bond Sub-account), in the same proportion
that each such Sub-account bears to your total Account Value, immediately
before the application of the amount. Any such amount will not be considered a
Purchase Payment when calculating your Protected Withdrawal Value, your death
benefit, or the amount of any optional benefit that you may have selected, and
therefore will have no direct impact on any such values at the time we add
this amount. Because the amount is added to Account Value, it will also be
subject to each charge under your Annuity based on Account Value. This
potential addition to Account Value is available only if you have elected
Highest Daily Lifetime 7 Plus and if you meet the conditions set forth in this
paragraph. Thus, if you take a withdrawal (other than a Non-Lifetime
Withdrawal) prior to the Tenth Anniversary, you are not eligible to receive
the Return of Principal Guarantee. The Return of Principal Guarantee is
referred to as the Guaranteed Minimum Account Value Credit in the benefit
rider.
KEY FEATURE - ANNUAL INCOME AMOUNT UNDER THE HIGHEST DAILY LIFETIME 7 PLUS
BENEFIT
The Annual Income Amount is equal to a specified percentage of the Protected
Withdrawal Value at the first Lifetime Withdrawal and does not reduce in
subsequent Annuity Years, as described below. The percentage initially depends
on the age of the Annuitant on the date of the first Lifetime Withdrawal after
election of the benefit. The percentages are: 4% for ages 45 - less than
59 1/2, 5% for ages 59 1/2 - 74, 6% for ages 75-79, 7% for ages 80-84, and 8%
for ages 85 and older.
Under the Highest Daily Lifetime 7 Plus benefit, if your cumulative Lifetime
Withdrawals in an Annuity Year are less than or equal to the Annual Income
Amount, they will not reduce your Annual Income Amount in subsequent Annuity
Years, but any such withdrawals will reduce the Annual Income Amount on a
dollar-for-dollar basis in that Annuity Year. If your cumulative Lifetime
Withdrawals in an Annuity Year are in excess of the Annual Income Amount
("Excess Income"), your Annual Income Amount in subsequent years will be
reduced (except with regard to required minimum distributions for this Annuity
that comply with our rules) by the result of the ratio of the Excess Income to
the Account Value immediately prior to such withdrawal (see examples of this
calculation below). Reductions are based on the actual amount of the
withdrawal. Lifetime Withdrawals of any amount up to and including the Annual
Income Amount will reduce the Protected Withdrawal Value by the amount of the
withdrawal. Withdrawals of Excess Income will reduce the Protected Withdrawal
Value by the same ratio as the reduction to the Annual Income Amount.
You may use the Systematic Withdrawal program to make withdrawals of the
Annual Income Amount. Any systematic withdrawal will be deemed a Lifetime
Withdrawal under this benefit.
Any Purchase Payment that you make subsequent to the election of Highest Daily
Lifetime 7 Plus will (i) increase the then-existing Annual Income Amount by an
amount equal to a percentage of the Purchase Payment based on the age of the
Annuitant at the time of the first Lifetime Withdrawal (the percentages are:
4% for ages 45 - less than 59 1/2, 5% for ages 59 1/2 - 74, 6% for ages 75-79,
7% for ages 80-84, and 8% for ages 85 and older) and (ii) increase the
Protected Withdrawal Value by the amount of the Purchase Payment.
If your Annuity permits additional purchase payments, we may limit any
additional purchase payment(s) if we determine that as a result of the timing
and amounts of your additional purchase payments and withdrawals, the Annual
Income Amount is being increased in an unintended fashion. Among the factors
we will use in making a determination as to whether an action is designed to
increase the Annual Income Amount in an unintended fashion is the relative
size of additional purchase payment(s). Subject to state law, we reserve the
right to not accept additional purchase payments if we are not then offering
this benefit for new elections. We will exercise such reservation of right for
all annuity purchasers in the same class in a nondiscriminatory manner.
HIGHEST DAILY AUTO STEP-UP
An automatic step-up feature ("Highest Daily Auto Step-Up") is part of Highest
Daily Lifetime 7 Plus. As detailed in this paragraph, the Highest Daily Auto
Step-Up feature can result in a larger Annual Income Amount subsequent to your
first Lifetime Withdrawal. The Highest Daily Auto Step-Up starts with the
anniversary of the Issue Date of the Annuity (the "Annuity Anniversary")
immediately after your first Lifetime Withdrawal under the benefit.
Specifically, upon the first such Annuity Anniversary, we identify the Account
Value on each Valuation Day within the immediately preceding Annuity Year
after your first
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Lifetime Withdrawal. Having identified the highest daily value (after all
daily values have been adjusted for subsequent purchase payments and
withdrawals), we then multiply that value by a percentage that varies based on
the age of the Annuitant on the Annuity Anniversary as of which the step-up
would occur. The percentages are: 4% for ages 45 - less than 59 1/2, 5% for
ages 59 1/2-74, 6% for ages 75-79, 7% for ages 80-84, and 8% for ages 85 and
older. If that value exceeds the existing Annual Income Amount, we replace the
existing amount with the new, higher amount. Otherwise, we leave the existing
Annual Income Amount intact. The Account Value on the Annuity Anniversary is
considered the last daily step-up value of the Annuity Year. All daily
valuations and annual step-ups will only occur on a Valuation Day. In later
years (i.e., after the first Annuity Anniversary after the first Lifetime
Withdrawal), we determine whether an automatic step-up should occur on each
Annuity Anniversary, by performing a similar examination of the Account Values
that occurred on Valuation Days during the year. At the time that we increase
your Annual Income Amount, we also increase your Protected Withdrawal Value to
equal the highest daily value upon which your step-up was based only if that
results in an increase to the Protected Withdrawal Value. Your Protected
Withdrawal Value will never be decreased as a result of an income step-up. If,
on the date that we implement a Highest Daily Auto Step-Up to your Annual
Income Amount, the charge for Highest Daily Lifetime 7 Plus has changed for
new purchasers, you may be subject to the new charge at the time of such
step-up. Prior to increasing your charge for Highest Daily Lifetime 7 Plus
upon a step-up, we would notify you, and give you the opportunity to cancel
the automatic step-up feature. If you receive notice of a proposed step-up and
accompanying fee increase, you should carefully evaluate whether the amount of
the step-up justifies the increased fee to which you will be subject.
If you establish a Systematic Withdrawal program, we will not automatically
increase the withdrawal amount when there is an increase to the Annual Income
Amount.
The Highest Daily Lifetime 7 Plus benefit does not affect your ability to make
withdrawals under your Annuity, or limit your ability to request withdrawals
that exceed the Annual Income Amount. Under Highest Daily Lifetime 7 Plus, if
your cumulative Lifetime Withdrawals in an Annuity Year are less than or equal
to the Annual Income Amount, they will not reduce your Annual Income Amount in
subsequent Annuity Years, but any such withdrawals will reduce the Annual
Income Amount on a dollar-for-dollar basis in that Annuity Year.
If, cumulatively, you withdraw an amount less than the Annual Income Amount in
any Annuity Year, you cannot carry over the unused portion of the Annual
Income Amount to subsequent Annuity Years.
Because each of the Protected Withdrawal Value and Annual Income Amount is
determined in a way that is not solely related to Account Value, it is
possible for the Account Value to fall to zero, even though the Annual Income
Amount remains.
Examples of dollar-for-dollar and proportional reductions, and the Highest
Daily Auto Step-Up are set forth below. The values shown here are purely
hypothetical, and do not reflect the charges for the Highest Daily Lifetime 7
Plus benefit or any other fees and charges. Assume the following for all three
examples:
.. The Issue Date is December 1, 2008
.. The Highest Daily Lifetime 7 Plus benefit is elected on March 5, 2009
.. The Annuitant was 70 years old when he/she elected the Highest Daily
Lifetime 7 Plus benefit.
EXAMPLE OF DOLLAR-FOR-DOLLAR REDUCTIONS
On November 24, 2009, the Protected Withdrawal Value is $120,000, resulting in
an Annual Income Amount of $6,000 (since the Annuitant is between the ages of
59 1/2 and 74 at the time of the first Lifetime Withdrawal, the Annual Income
Amount is 5% of the Protected Withdrawal Value, in this case 5% of $120,000).
Assuming $2,500 is withdrawn from the Annuity on this date, the remaining
Annual Income Amount for that Annuity Year (up to and including December 1,
2009) is $3,500. This is the result of a dollar-for-dollar reduction of the
Annual Income Amount ($6,000 less $2,500 = $3,500).
EXAMPLE OF PROPORTIONAL REDUCTIONS
Continuing the previous example, assume an additional withdrawal of $5,000
occurs on November 27, 2009 and the Account Value at the time and immediately
prior to this withdrawal is $118,000. The first $3,500 of this withdrawal
reduces the Annual Income Amount for that Annuity Year to $0. The remaining
withdrawal amount of $1,500 - reduces the Annual Income Amount in future
Annuity Years on a proportional basis based on the ratio of the excess
withdrawal to the Account Value immediately prior to the excess withdrawal.
(Note that if there are other future withdrawals in that Annuity Year, each
would result in another proportional reduction to the Annual Income Amount).
HERE IS THE CALCULATION:
Account Value before Lifetime Withdrawal $118,000.00
Less amount of "non" excess withdrawal $ 3,500.00
Account Value immediately before excess withdrawal of $1,500 $114,500.00
Excess withdrawal amount $ 1,500.00
Divided by Account Value immediately before excess withdrawal $114,500.00
Ratio 1.31%
Annual Income Amount $ 6,000.00
Less ratio of 1.31% $ 78.60
Annual Income Amount for future Annuity Years $ 5,921.40
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EXAMPLE OF HIGHEST DAILY AUTO STEP-UP
On each Annuity Anniversary date, the Annual Income Amount is stepped-up if
the appropriate percentage (based on the Annuitant's age on the Annuity
Anniversary) of the highest daily value since your first Lifetime Withdrawal
(or last Annuity Anniversary in subsequent years), adjusted for withdrawals
and additional Purchase Payments, is higher than the Annual Income Amount,
adjusted for excess withdrawals and additional Purchase Payments.
Continuing the same example as above, the Annual Income Amount for this
Annuity Year is $6,000. However, the excess withdrawal on November 27 reduces
the amount to $5,921.40 for future years (see above). For the next Annuity
Year, the Annual Income Amount will be stepped up if 5% (since the designated
life is between 59 1/2 and 74 on the date of the potential step-up) of the
highest daily Account Value adjusted for withdrawals and Purchase Payments, is
higher than $5,921.40. Here are the calculations for determining the daily
values. Only the November 25 value is being adjusted for excess withdrawals as
the November 30 and December 1 Valuation Days occur after the excess
withdrawal on November 27.
HIGHEST DAILY VALUE
(ADJUSTED WITH ADJUSTED ANNUAL
WITHDRAWAL AND PURCHASE INCOME AMOUNT (5% OF THE
DATE* ACCOUNT VALUE PAYMENTS)** HIGHEST DAILY VALUE)
----- ------------- ----------------------- ------------------------
November 25, 2009 $119,000.00 $ 119,000.00 $5,950.00
November 26, 2009 Thanksgiving Day
November 27, 2009 $113,000.00 $ 113,986.95 $5,699.35
November 30, 2009 $113,000.00 $ 113,986.95 $5,699.35
December 01, 2009 $119,000.00 $ 119,000.00 $5,950.00
* In this example, the Annuity Anniversary date is December 1. The Valuation
Dates are every day following the first Lifetime Withdrawal. In subsequent
Annuity Years Valuation Dates will be every day following the Annuity
Anniversary. The Annuity Anniversary Date of December 1 is considered the
final Valuation Date for the Annuity Year.
** In this example, the first daily value after the first Lifetime Withdrawal
is $119,000 on November 25, resulting in an adjusted Annual Income Amount
of $5,950.00. This amount is adjusted on November 27 to reflect the $5,000
withdrawal. The calculations for the adjustments are:
. The Account Value of $119,000 on November 25 is first reduced
dollar-for-dollar by $3,500 ($3,500 is the remaining Annual Income
Amount for the Annuity Year), resulting in an adjusted Account Value of
$115,500 before the excess withdrawal.
. This amount ($115,500) is further reduced by 1.31% (this is the ratio in
the above example which is the excess withdrawal divided by the Account
Value immediately preceding the excess withdrawal) resulting in a
Highest Daily Value of $113,986.95.
. The adjusted Annual Income Amount is carried forward to the next
Valuation Date of November 30. At this time, we compare this amount to
5% of the Account Value on November 30. Since the November 27 adjusted
Annual Income Amount of $5,699.35 is higher than $5,650.00 (5% of
$113,000), we continue to carry $5,699.35 forward to the next and final
Valuation Date of December 1. The Account Value on December 1 is
$119,000 and 5% of this amount is $5,950. Since this is higher than
$5,699.35, the adjusted Annual Income Amount is reset to $5,950.00.
In this example, 5% of the December 1 value results in the highest amount of
$5,950.00. Since this amount is higher than the current year's Annual Income
Amount of $5,921.40 adjusted for excess withdrawals, the Annual Income Amount
for the next Annuity Year, starting on December 2, 2009 and continuing through
December 1, 2010, will be stepped-up to $5,950.00.
NON-LIFETIME WITHDRAWAL FEATURE
You may take a one-time non-lifetime withdrawal ("Non-Lifetime Withdrawal")
under Highest Daily Lifetime 7 Plus. It is an optional feature of the benefit
that you can only elect at the time of your first withdrawal. You cannot take
a Non-Lifetime Withdrawal in an amount that would cause your Annuity's Account
Value, after taking the withdrawal, to fall below the minimum Surrender Value
(see "Access to Account Value - Can I Surrender My Annuity for Its Value?").
This Non-Lifetime Withdrawal will not establish your initial Annual Income
Amount and the Periodic Value described above will continue to be calculated.
However, the total amount of the withdrawal will proportionally reduce all
guarantees associated with the Highest Daily Lifetime 7 Plus benefit. You must
tell us if your withdrawal is intended to be the Non-Lifetime Withdrawal and
not the first Lifetime Withdrawal under the Highest Daily Lifetime 7 Plus
benefit. If you don't elect the Non-Lifetime Withdrawal, the first withdrawal
you make will be the first Lifetime Withdrawal that establishes your Protected
Withdrawal Value and Annual Income Amount. Once you elect to take the
Non-Lifetime Withdrawal or Lifetime Withdrawals, no additional Non-Lifetime
Withdrawals may be taken.
The Non-Lifetime Withdrawal will proportionally reduce the Protected
Withdrawal Value and the Return of Principal guarantee. It will also
proportionally reduce the Periodic Value guarantees on the tenth, twentieth
and twenty-fifth anniversaries of the benefit effective date (see description
in "Key Feature - Protected Withdrawal Value," above). It will reduce all
three by the percentage the total withdrawal amount (including any applicable
CDSC) represents of the then current Account Value immediately prior to the
withdrawal.
If you are participating in a Systematic Withdrawal program, the first
withdrawal under the program cannot be classified as the Non-Lifetime
Withdrawal. The first partial withdrawal in payment of any third party
investment advisory service from your Annuity also cannot be classified as the
Non-Lifetime Withdrawal.
EXAMPLE - NON-LIFETIME WITHDRAWAL (PROPORTIONAL REDUCTION)
This example is purely hypothetical and does not reflect the charges for the
benefit or any other fees and charges. It is intended to illustrate the
proportional reduction of the Non-Lifetime Withdrawal under this benefit.
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Assume the following:
.. The Issue Date is December 1, 2008
.. The Highest Daily Lifetime 7 Plus benefit is elected on March 5, 2009
.. The Account Value at benefit election was $105,000
.. The Annuitant was 70 years old when he/she elected the Highest Daily
Lifetime 7 Plus benefit.
.. No previous withdrawals have been taken under the Highest Daily Lifetime 7
Plus benefit.
On May 2, 2009, the Protected Withdrawal Value is $125,000, the 10/th/ benefit
year minimum Periodic Value guarantee is $210,000, the 10/th/ benefit year
Return of Principal guarantee is $105,000, the 20/th/ benefit year minimum
Periodic Value guarantee is $420,000, the 25/th/ benefit year minimum Periodic
Value guarantee is $630,000 and the Account Value is $120,000. Assuming
$15,000 is withdrawn from the Annuity on May 2, 2009 and is designated as a
Non-Lifetime Withdrawal, all guarantees associated with the Highest Daily
Lifetime 7 Plus benefit will be reduced by the ratio the total withdrawal
amount represents of the Account Value just prior to the withdrawal being
taken.
HERE IS THE CALCULATION:
Withdrawal Amount divided by $ 15,000
Account Value before withdrawal $120,000
Equals ratio 12.5%
All guarantees will be reduced by the above ratio (12.5%)
Protected Withdrawal Value $109,375
10/th/ benefit year Return of Principal $ 91,875
10/th/ benefit year Minimum Periodic Value $183,750
20/th/ benefit year Minimum Periodic Value $367,500
25/th/ benefit year Minimum Periodic Value $551,250
REQUIRED MINIMUM DISTRIBUTIONS
Withdrawals that exceed the Annual Income Amount, but which you are required
to take as a required minimum distribution for this Annuity, will not reduce
the Annual Income Amount for future years. No additional Annual Income Amounts
will be available in an Annuity Year due to required minimum distributions
unless the required minimum distribution amount is greater than the Annual
Income Amount. Any withdrawal you take that exceeds the Annual Income Amount
in Annuity Years that your required minimum distribution amount is not greater
than the Annual Income Amount will be treated as an Excess Withdrawal under
the benefit. If the required minimum distribution (as calculated by us for
your Annuity and not previously withdrawn in the current calendar year) is
greater than the Annual Income Amount, an amount equal to the remaining Annual
Income Amount plus the difference between the required minimum distribution
amount not previously withdrawn in the current calendar year and the Annual
Income Amount will be available in the current Annuity Year without it being
considered an excess withdrawal. In the event that a required minimum
distribution is calculated in a calendar year that crosses more than one
Annuity Year and you choose to satisfy the entire required minimum
distribution for that calendar year in the next Annuity Year, the distribution
taken in the next Annuity Year will reduce your Annual Income Amount in that
Annuity Year on a dollar by dollar basis. If the required minimum distribution
not taken in the prior Annuity Year is greater than the Annual Income Amount
as guaranteed by the benefit in the current Annuity Year, the total required
minimum distribution amount may be taken without being treated as an excess
withdrawal.
EXAMPLE - REQUIRED MINIMUM DISTRIBUTIONS
The following example is purely hypothetical and is intended to illustrate a
scenario in which the required minimum distribution amount in a given Annuity
Year is greater than the Annual Income Amount.
Annual Income Amount = $5,000
Remaining Annual Income Amount = $3,000
Required Minimum Distribution = $6,000
The amount you may withdraw in the current Annuity Year without it being
treated as an Excess Withdrawal is $4,000. ($3,000 + ($6,000 - $5,000) =
$4,000).
If the $4,000 withdrawal is taken, the remaining Annual Income Amount will be
zero and the remaining required minimum distribution amount of $2,000 may be
taken in the subsequent Annuity Year (when your Annual Income Amount is reset
to $5,000) without proportionally reducing all of the guarantees associated
with the Highest Daily Lifetime 7 Plus benefit as described above. The amount
you may withdraw in the subsequent Annuity Year if you choose not to satisfy
the required minimum distribution in the current Annuity Year (assuming the
Annual Income Amount in the subsequent Annuity Year is $5,000), without being
treated as an Excess Withdrawal is $6,000. This withdrawal must comply with
all IRS guidelines in order to satisfy the required minimum distribution for
the current calendar year.
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BENEFITS UNDER HIGHEST DAILY LIFETIME 7 PLUS
.. To the extent that your Account Value was reduced to zero as a result of
cumulative Lifetime Withdrawals in an Annuity Year that are less than or
equal to the Annual Income Amount or as a result of the fee that we assess
for Highest Daily Lifetime 7 Plus, and amounts are still payable under
Highest Daily Lifetime 7 Plus, we will make an additional payment, if any,
for that Annuity Year equal to the remaining Annual Income Amount for the
Annuity Year. If you have not begun taking Lifetime Withdrawals and your
Account Value is reduced to zero as a result of the fee we assess for
Highest Daily Lifetime 7 Plus, we will calculate the Annual Income Amount
as if you made your first Lifetime Withdrawal on the date the Account Value
was reduced to zero and Lifetime Withdrawals will begin on the next Annuity
anniversary. If this were to occur, you are not permitted to make
additional purchase payments to your Annuity. Thus, in these scenarios, the
remaining Annual Income Amount would be payable even though your Account
Value was reduced to zero. In subsequent Annuity Years we make payments
that equal the Annual Income Amount as described in this section. We will
make payments until the death of the single designated life. To the extent
that cumulative withdrawals in the Annuity Year that reduced your Account
Value to zero are more than the Annual Income Amount, the Highest Daily
Lifetime 7 Plus benefit terminates, and no additional payments are made.
However, if a withdrawal in the latter scenario was taken to satisfy a
required minimum distribution under the Annuity, then the benefit will not
terminate, and we will continue to pay the Annual Income Amount in
subsequent Annuity Years until the death of the Designated Life.
.. If Annuity payments are to begin under the terms of your Annuity, or if you
decide to begin receiving Annuity payments and there is an Annual Income
Amount due in subsequent Annuity Years, you can elect one of the following
two options:
(1)apply your Account Value to any Annuity option available; or
(2)request that, as of the date Annuity payments are to begin, we make
Annuity payments each year equal to the Annual Income Amount. If this
option is elected, the Annual Income Amount will not increase after
annuity payments have begun. We will make payments until the death of
the single Designated Life. We must receive your request in a form
acceptable to us at our office.
.. In the absence of an election when mandatory annuity payments are to begin,
we will make annual annuity payments in the form of a single life fixed
annuity with ten payments certain, by applying the greater of the annuity
rates then currently available or the annuity rates guaranteed in your
Annuity. The amount that will be applied to provide such Annuity payments
will be the greater of:
(1)the present value of the future Annual Income Amount payments. Such
present value will be calculated using the greater of the single life
fixed annuity rates then currently available or the single life fixed
annuity rates guaranteed in your Annuity; and
(2)the Account Value.
.. If no Lifetime Withdrawal was ever taken, we will calculate the Annual
Income Amount as if you made your first Lifetime Withdrawal on the date the
annuity payments are to begin.
.. Please note that payments that we make under this benefit after the Annuity
Anniversary coinciding with or next following the annuitant's 95/th/
birthday will be treated as annuity payments.
OTHER IMPORTANT CONSIDERATIONS
.. Withdrawals under the Highest Daily Lifetime 7 Plus benefit are subject to
all of the terms and conditions of the Annuity.
.. Withdrawals made while the Highest Daily Lifetime 7 Plus Benefit is in
effect will be treated, for tax purposes, in the same way as any other
withdrawals under the Annuity. Any withdrawals made under the benefit will
be taken pro-rata from the Sub-accounts (including the AST Investment Grade
Bond Sub-account) and the DCA Fixed Rate Options (if you are participating
in the 6 or 12 Month DCA Program). Withdrawals from the DCA Fixed Rate
Options will be taken on a last-in, first-out basis.
.. You can make withdrawals from your Annuity while your Account Value is
greater than zero without purchasing the Highest Daily Lifetime 7 Plus
benefit. The Highest Daily Lifetime 7 Plus benefit provides a guarantee
that if your Account Value is reduced to zero (subject to our rules
regarding time and amount of withdrawals), you will be able to receive your
Annual Income Amount in the form of periodic benefit payments.
.. You should carefully consider when to begin taking withdrawals. If you
begin taking withdrawals early, you may maximize the time during which you
may take withdrawals due to longer life expectancy, and you will be using
an optional benefit for which you are paying a charge. On the other hand,
you could limit the value of the benefit if you begin taking withdrawals
too soon. For example, withdrawals reduce your Account Value and may limit
the potential for increasing your Protected Withdrawal Value. You should
discuss with your Financial Professional when it may be appropriate for you
to begin taking withdrawals.
.. Upon inception of the benefit and to maintain the benefit, 100% of your
Account Value must have been allocated to the Permitted Sub-accounts.
.. You cannot allocate Purchase Payments or transfer Account Value to or from
the AST Investment Grade Bond Portfolio Sub-account (see description below)
if you elect this benefit. A summary description of the AST Investment
Grade Bond Portfolio appears within the prospectus section entitled "What
Are The Investment Objectives and Policies of The Portfolios?". You can
find a copy of the AST Investment Grade Bond Portfolio prospectus by going
to www.prudentialannuities.com.
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.. Transfers to and from the elected Sub-accounts and the AST Investment Grade
Bond Portfolio Sub-account triggered by the Highest Daily Lifetime 7 Plus
mathematical formula program will not count toward the maximum number of
free transfers allowable under an Annuity.
.. You must allocate your Account Value in accordance with the then available
investment option(s) that we may prescribe in order to maintain the Highest
Daily Lifetime 7 Plus benefit. If, subsequent to your election of the
benefit, we change our requirements for how Account Value must be allocated
under the benefit, we will not compel you to re-allocate your Account Value
in accordance with our newly adopted requirements. Subject to any change in
requirements, transfer of Account Value and allocation of additional
purchase payments may be subject to new investment limitations.
.. The maximum charge for Highest Daily Lifetime 7 Plus is 1.50% annually of
the greater of Account Value and the Protected Withdrawal Value (PWV). The
current charge is 0.75% annually of the greater of Account Value and the
Protected Withdrawal Value. We deduct this fee on each quarterly
anniversary of the benefit effective date. Thus, on each such quarterly
anniversary (or the next Valuation Day, if the quarterly anniversary is not
a Valuation Day), we deduct 0.1875% of the greater of the prior day's
Account Value or the prior day's Protected Withdrawal Value at the end of
the quarter. We deduct the fee pro rata from each of the Sub-accounts
including the AST Investment Grade Bond Portfolio Sub-account and from the
DCA Fixed Rate Option (if applicable). Since this fee is based on the
greater of the Account Value or the Protected Withdrawal Value, the fee for
Highest Daily Lifetime 7 Plus may be greater than it would have been, had
it been based on the Account Value alone. If the fee to be deducted exceeds
the Account Value at the benefit quarter, we will charge the remainder of
the Account Value for the benefit and continue the benefit as described
above. You will begin paying the charge for this benefit as of the
effective date of the benefit, even if you do not begin taking withdrawals
for many years, or ever. We will not refund the charges you have paid if
you choose never to take any withdrawals and/or if you never receive any
lifetime income payments.
.. The Basic Death Benefit will terminate if withdrawals taken under Highest
Daily Lifetime 7 Plus cause your Account Value to reduce to zero. Certain
optional Death Benefits may terminate if withdrawals taken under Highest
Daily Lifetime 7 Plus cause your Account Value to reduce to zero. (See
"Death Benefit" for more information.)
ELECTION OF AND DESIGNATIONS UNDER THE BENEFIT
We no longer permit new elections of Highest Daily Lifetime 7 Plus. For
Highest Daily Lifetime 7 Plus, there must have been either a single Owner who
is the same as the Annuitant, or if the Annuity is entity owned, there must
have been a single natural person Annuitant. In either case, the Annuitant
must have been at least 45 years old.
Any change of the Annuitant under the Annuity will result in cancellation of
Highest Daily Lifetime 7 Plus. Similarly, any change of Owner will result in
cancellation of Highest Daily Lifetime 7 Plus, except if (a) the new Owner has
the same taxpayer identification number as the previous owner, (b) ownership
is transferred from a custodian to the Annuitant, or vice versa or
(c) ownership is transferred from one entity to another entity that is
satisfactory to us. PLEASE NOTE THAT IF YOU TERMINATE A LIVING BENEFIT SUCH AS
HIGHEST DAILY LIFETIME 7 PLUS AND ELECT A NEW LIVING BENEFIT, YOU LOSE THE
GUARANTEES THAT YOU HAD ACCUMULATED UNDER YOUR EXISTING BENEFIT AND WE WILL
BASE ANY GUARANTEES UNDER THE NEW BENEFIT ON YOUR ACCOUNT VALUE AS OF THE DATE
THE NEW BENEFIT BECOMES ACTIVE. WE RESERVE THE RIGHT TO WAIVE, CHANGE AND/OR
FURTHER LIMIT THE ELECTION FREQUENCY IN THE FUTURE.
TERMINATION OF THE BENEFIT
You may terminate Highest Daily Lifetime 7 Plus at any time by notifying us.
If you terminate the benefit, any guarantee provided by the benefit will
terminate as of the date the termination is effective, and certain
restrictions on re-election may apply. The benefit automatically terminates:
(i) upon your termination of the benefit, (ii) upon your surrender of the
Annuity, (iii) upon your election to begin receiving annuity payments
(although if you have elected to receive the Annual Income Amount in the form
of Annuity payments, we will continue to pay the Annual Income Amount),
(iv) upon our receipt of due proof of the death of the Annuitant, (v) if both
the Account Value and Annual Income Amount equal zero, or (vi) if you cease to
meet our requirements as described in "Election of and Designations under the
Benefit".
Upon termination of Highest Daily Lifetime 7 Plus other than upon the death of
the Annuitant, we impose any accrued fee for the benefit (i.e., the fee for
the pro-rated portion of the year since the fee was last assessed), and
thereafter we cease deducting the charge for the benefit. With regard to your
investment allocations, upon termination we will: (i) leave intact amounts
that are held in the variable investment options, and (ii) transfer all
amounts held in the AST Investment Grade Bond Portfolio Sub-account to your
variable investment options, based on your existing allocation instructions or
(in the absence of such existing instructions) pro rata (i.e. in the same
proportion as the current balances in your variable investment options).
If a surviving spouse elects to continue the Annuity, the Highest Daily
Lifetime 7 Plus benefit terminates. The spouse may elect the benefit subject
to the restrictions discussed above.
HOW HIGHEST DAILY LIFETIME 7 PLUS TRANSFERS ACCOUNT VALUE BETWEEN YOUR
PERMITTED SUB-ACCOUNTS AND THE AST INVESTMENT GRADE BOND SUB-ACCOUNT
As indicated above, we limit the Sub-accounts to which you may allocate
Account Value if you elect Highest Daily Lifetime 7 Plus. For purposes of this
benefit, we refer to those permitted investment options as the "Permitted
Sub-accounts". If your annuity
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was issued on or after May 1, 2009 (subject to regulatory approval), you may
also choose to allocate purchase payments while this program is in effect to
DCA Fixed Rate Options utilized with our 6 or 12 Month Dollar Cost Averaging
Program ("6 or 12 Month DCA Program"). If you are participating in Highest
Daily Lifetime 7 Plus and also are participating in the 6 or 12 Month DCA
Program, and the formula under the benefit dictates a transfer from the
Permitted Sub-accounts to the AST Investment Grade Bond Sub-account, then the
amount to be transferred will be taken entirely from the Sub-accounts,
provided there is sufficient Account Value in those Sub-accounts to meet the
required transfer amount. Only if there is insufficient Account Value in those
Sub-accounts will an amount be withdrawn from the DCA Fixed Rate Options.
Amounts withdrawn from the DCA Fixed Rate Options under the formula will be
taken on a last-in, first-out basis. For purposes of the discussion below
concerning transfers from the Permitted Sub-accounts to the AST Investment
Grade Bond Sub-account, amounts held within the DCA Fixed Rate Options are
included within the term "Permitted Sub-Accounts". Thus, amounts may be
transferred from the DCA Fixed Rate Options in the circumstances described
above and in the section of this prospectus entitled 6 or 12 Month Dollar Cost
Averaging Program. Any transfer dictated by the formula out of the AST
Investment Grade Bond Sub-account will be transferred to the Permitted
Sub-accounts, not including the DCA Fixed Rate Options.
An integral part of Highest Daily Lifetime 7 Plus is the pre-determined
mathematical formula used to transfer Account Value between the Permitted
Sub-Accounts and a specified bond fund within the Advanced Series Trust (the
"AST Investment Grade Bond Sub-Account"). The AST Investment Grade Bond
Sub-account is available only with this benefit, and thus you may not allocate
purchase payments to or make transfers to or from the AST Investment Grade
Bond Sub-account. The formula monitors your Account Value daily and, if
dictated by the formula, systematically transfers amounts between the
Permitted Sub-accounts you have chosen and the AST Investment Grade Bond
Sub-account. The formula is set forth in Appendix L.
Speaking generally, the formula, which is applied each Valuation Day, operates
as follows. The formula starts by identifying an income basis for that day and
then multiplies that figure by 5%, to produce a projected (i.e., hypothetical)
income amount. Note that 5% is used in the formula, irrespective of the
Annuitant's attained age. Then it produces an estimate of the total amount
targeted in our allocation model, based on the projected income amount and
factors set forth in the formula. In the formula, we refer to that value as
the "Target Value" or "L". If you have already made a withdrawal, your
projected income amount (and thus your Target Value) would take into account
any automatic step-up, any subsequent purchase payments, and any excess
withdrawals. Next, the formula subtracts from the Target Value the amount held
within the AST Investment Grade Bond Sub-account on that day, and divides that
difference by the amount held within the Permitted Sub-accounts including any
amounts allocated to DCA Fixed Rate Options. That ratio, which essentially
isolates the amount of your Target Value that is not offset by amounts held
within the AST Investment Grade Bond Sub-account, is called the "Target Ratio"
or "r". If, on each of three consecutive Valuation Days, the Target Ratio is
greater than 83% but less than or equal to 84.5%, the formula will, on such
third Valuation Day, make a transfer from the Permitted Sub-accounts in which
you are invested (subject to the 90% cap feature) to the AST Investment Grade
Bond Sub-account. As discussed above, if all or a portion of your Account
Value is allocated to one or more DCA Fixed Rate Options at the time a
transfer to the AST Investment Grade Bond Sub-account is required under the
formula, we will first look to process the transfer from the Permitted
Sub-accounts. If the amount allocated to the Permitted Sub-accounts is
insufficient to satisfy the transfer, then any remaining amounts will be
transferred from the DCA Fixed Rate Options on a "last-in, first-out" basis.
Once a transfer is made, the three consecutive Valuation Days begin again. If,
however, on any Valuation Day, the Target Ratio is above 84.5%, it will make a
transfer from the Permitted Sub-accounts (subject to the 90% cap) to the AST
Investment Grade Bond Sub-account (as described above). If the Target Ratio
falls below 78% on any Valuation Day, then a transfer from the AST Investment
Grade Bond Sub-account to the Permitted Sub-accounts will occur.
The formula will not execute a transfer to the AST Investment Grade Bond
Sub-account that results in more than 90% of your Account Value being
allocated to the AST Investment Grade Bond Sub-account ("90% cap"). Thus, on
any Valuation Day, if the formula would require a transfer to the AST
Investment Grade Bond Sub-account that would result in more than 90% of the
Account Value being allocated to the AST Investment Grade Bond Sub-account,
only the amount that results in exactly 90% of the Account Value being
allocated to the AST Investment Grade Bond Sub-account will be transferred.
Additionally, future transfers into the AST Investment Grade Bond Sub-account
will not be made (regardless of the performance of the AST Investment Grade
Bond Sub-account and the Permitted Sub-accounts) at least until there is first
a transfer out of the AST Investment Grade Bond Sub-account. Once this
transfer occurs out of the AST Investment Grade Bond Sub-account, future
amounts may be transferred to or from the AST Investment Grade Bond
Sub-account if dictated by the formula (subject to the 90% cap). At no time
will the formula make a transfer to the AST Investment Grade Bond Sub-account
that results in greater than 90% of your Account Value being allocated to the
AST Investment Grade Bond Sub-account. However, it is possible that, due to
the investment performance of your allocations in the AST Investment Grade
Bond Sub-account and your allocations in the permitted sub-accounts you have
selected, your Account Value could be more than 90% invested in the AST
Investment Grade Bond Sub-account.
If you make additional purchase payments to your Annuity while the 90% cap is
in effect, the formula will not transfer any of such additional purchase
payments to the AST Investment Grade Bond Sub-account at least until there is
first a transfer out of the AST Investment Grade Bond Sub-account, regardless
of how much of your Account Value is in the Permitted Sub-accounts. This means
that there could be scenarios under which, because of the additional purchase
payments you make, less than 90% of your entire Account Value is allocated to
the AST Investment Grade Bond Sub-account, and the formula will still not
transfer any of your
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Account Value to the AST Investment Grade Bond Sub-account (at least until
there is first a transfer out of the AST Investment Grade Bond Sub-account).
For example,
.. March 19, 2009 - a transfer is made to the AST Investment Grade Bond
Sub-account that results in the 90% cap being met and now $90,000 is
allocated to the AST Investment Grade Bond Sub-account and $10,000 is
allocated to the Permitted Sub-accounts.
.. March 20, 2009 - you make an additional purchase payment of $10,000. No
transfers have been made from the AST Investment Grade Bond Sub-account to
the Permitted Sub-accounts since the cap went into effect on March 19, 2009.
.. On March 20, 2009 (and at least until first a transfer is made out of the
AST Investment Grade Bond Sub-account under the formula) - the $10,000
payment is allocated to the Permitted Sub-accounts and on this date you
have 82% in the AST Investment Grade Bond Sub-account and 18% in the
Permitted Sub-accounts (such that $20,000 is allocated to the Permitted
Sub-accounts and $90,000 to the AST Investment Grade Bond Sub-account).
.. Once there is a transfer out of the AST Investment Grade Bond Sub-account
(of any amount), the formula will operate as described above, meaning that
the formula could transfer amounts to or from the AST Investment Grade Bond
Sub-account if dictated by the formula (subject to the 90% cap).
Under the operation of the formula, the 90% cap may come into existence and be
removed multiple times while you participate in the benefit. We will continue
to monitor your Account Value daily and, if dictated by the formula,
systematically transfer amounts between the Permitted Sub-accounts you have
chosen and the AST Investment Grade Bond Sub-account as dictated by
the formula.
As you can glean from the formula, poor or flat investment performance of your
Account Value may result in a transfer of a portion of your Account Value in
the Permitted Sub-accounts to the AST Investment Grade Bond Sub-account
because such poor investment performance will tend to increase the Target
Ratio. Because the amount allocated to the AST Investment Grade Bond
Sub-account and the amount allocated to the Permitted Sub-accounts each is a
variable in the formula, the investment performance of each affects whether a
transfer occurs for your Annuity. In deciding how much to transfer, we use
another formula, which essentially seeks to re-balance amounts held in the
Permitted Sub-accounts and the AST Investment Grade Bond Sub-account so that
the Target Ratio meets a target, which currently is equal to 80%. Once you
elect Highest Daily Lifetime 7 Plus, the values we use to compare to the
Target Ratio will be fixed.
Additionally, on each monthly Annuity Anniversary (if the monthly Annuity
Anniversary does not fall on a Valuation Day, the next Valuation Day will be
used), following all of the above described daily calculations, a transfer may
be made from the AST Investment Grade Bond Sub-account to the Permitted
Sub-accounts. Any such transfer will be based on your existing allocation
instructions or (in the absence of such existing instructions) pro rata (i.e.
in the same proportion as the current balances in your variable investment
options). This transfer will automatically occur provided that the Target
Ratio, as described above, would be less than 83% after the transfer. The
formula will not execute a transfer if the Target Ratio after this transfer
would occur would be greater than or equal to 83%.
The amount of the transfer will be equal to the lesser of:
a) The total value of all your Account Value in the AST Investment Grade Bond
Sub-account, or
b) An amount equal to 5% of your total Account Value.
While you are not notified when your Annuity reaches a transfer trigger under
the formula, you will receive a confirmation statement indicating the transfer
of a portion of your Account Value either to or from the AST Investment Grade
Bond Sub-account. The formula by which the transfer operates is designed
primarily to mitigate some of the financial risks that we incur in providing
the guarantee under Highest Daily Lifetime 7 Plus. Depending on the results of
the calculations of the formula, we may, on any Valuation Day:
.. Not make any transfer between the Permitted Sub-accounts and the AST
Investment Grade Bond Sub-account; or
.. If a portion of your Account Value was previously allocated to the AST
Investment Grade Bond Sub-account, transfer all or a portion of those
amounts to the Permitted Sub-accounts, based on your existing allocation
instructions or (in the absence of such existing instructions) pro rata
(i.e., in the same proportion as the current balances in your variable
investment options); or
.. Transfer a portion of your Account Value in the Permitted Sub-accounts pro
rata to the AST Investment Grade Bond Sub-account.
At any given time, some, most or none of your Account Value will be allocated
to the AST Investment Grade Bond Sub-account, as dictated by the formula
Prior to the first Lifetime Withdrawal, the primary driver of transfers to the
AST Investment Grade Bond Sub-account is difference between your Account Value
and your Protected Withdrawal Value. If none of your Account Value is
allocated to the AST Investment Grade Bond Sub-account, then over time the
formula permits an increasing difference between the Account Value and the
Protected Withdrawal Value before a transfer to the AST Investment Grade Bond
Sub-account occurs. Therefore, as time goes on, while none of your Account
Value is allocated to the AST Investment Grade Bond Sub-account, the smaller
the difference between the Protected Withdrawal Value and the Account Value,
the more the Account Value can decrease prior to a transfer to the AST
Investment Grade Bond Sub-account.
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Each market cycle is unique, therefore the performance of your Sub-accounts,
and its impact on your Account Value, will differ from market cycle to market
cycle producing different transfer activity under the formula. The amount and
timing of transfers to and from the AST Investment Grade Bond Sub-account
pursuant to the formula depend on various factors unique to your Annuity and
are not necessarily directly correlated with the securities markets, bond
markets, interest rates or any other market or index. Some of the factors that
determine the amount and timing of transfers (as applicable to your Annuity),
include:
.. The difference between your Account Value and your Protected Withdrawal
Value;
.. The amount of time Highest Daily Lifetime 7 Plus has been in effect on your
Annuity;
.. The amount allocated to and the performance of the Permitted Sub-accounts
and the AST Investment Grade Bond Sub-account;
.. Any additional Purchase Payments you make to your Annuity (while the
benefit is in effect); and;
.. Any withdrawals you take from your Annuity (while the benefit is in effect).
Because the amount allocated to the AST Investment Grade Bond Sub-account and
the amount allocated to the Permitted Sub-accounts each is a variable in the
formula, the investment performance of each affects whether a transfer occurs
for your Annuity. The greater the amounts allocated to either the AST
Investment Grade Bond Sub-account or to the Permitted Sub-accounts, the
greater the impact performance of those investments have on your Account Value
and thus the greater the impact on whether (and how much) your Account Value
is transferred to or from the AST Investment Grade Bond Sub-account. It is
possible, under the formula, that if a significant portion of your Account
Value is allocated to the AST Investment Grade Bond Sub-account and that
Sub-account has positive performance, the formula might transfer a portion of
your Account Value to the Permitted Sub-accounts, even if the performance of
your Permitted Sub-accounts is negative. Conversely, if a significant portion
of your Account Value is allocated to the AST Investment Grade Bond
Sub-account and that Sub-account has negative performance, the formula may
transfer additional amounts from your Permitted Sub-accounts to the AST
Investment Grade Bond Sub-account even if the performance of your Permitted
Sub-accounts is positive.
If you make additional Purchase Payments to your Annuity, they will be
allocated in accordance with your Annuity. Once allocated, they will also be
subject to the formula described above and therefore may be transferred to the
AST Investment Grade Bond Sub-account, if dictated by the formula and subject
to the 90% cap feature.
Any Account Value in the AST Investment Grade Bond Sub-account will not
participate in the positive or negative investment experience of the Permitted
Sub-accounts until it is transferred out of the AST Investment Grade Bond
Sub-account.
ADDITIONAL TAX CONSIDERATIONS
If you purchase an annuity as an investment vehicle for "qualified"
investments, including an IRA, SEP-IRA, Tax Sheltered Annuity (or 403(b)) or
employer plan under Code Section 401(a), the required minimum distribution
rules under the Code provide that you begin receiving periodic amounts from
your annuity beginning after age 70 1/2. For a Tax Sheltered Annuity or a
401(a) plan for which the participant is not a greater than five (5) percent
owner of the employer, this required beginning date can generally be deferred
to retirement, if later. Roth IRAs are not subject to these rules during the
owner's lifetime. The amount required under the Code may exceed the Annual
Income Amount, which will cause us to increase the Annual Income Amount in any
Annuity Year that required minimum distributions due from your Annuity are
greater than such amounts. In addition, the amount and duration of payments
under the annuity payment and death benefit provisions may be adjusted so that
the payments do not trigger any penalty or excise taxes due to tax
considerations such as required minimum distribution provisions under the tax
law. Please note, however, that any withdrawal (except the Non-Lifetime
Withdrawal) you take prior to the Tenth Anniversary, even if withdrawn to
satisfy required minimum distribution rules, will cause you to lose the
ability to receive the Return of Principal Guarantee and the guaranteed amount
described above under "Key Feature - Protected Withdrawal Value".
As indicated, withdrawals made while this benefit is in effect will be
treated, for tax purposes, in the same way as any other withdrawals under the
Annuity. Please see the Tax Considerations section of the prospectus for a
detailed discussion of the tax treatment of withdrawals. We do not address
each potential tax scenario that could arise with respect to this benefit
here. However, we do note that if you participate in Highest Daily Lifetime 7
Plus through a non-qualified annuity, as with all withdrawals, once all
Purchase Payments are returned under the Annuity, all subsequent withdrawal
amounts will be taxed as ordinary income.
HIGHEST DAILY LIFETIME 7 PLUS WITH BENEFICIARY INCOME OPTION/SM /
We previously offered an optional death benefit feature under Highest Daily
Lifetime 7 Plus, the amount of which is linked to your Annual Income Amount.
We refer to this optional death benefit as the Beneficiary Income Option or
BIO. Please note that if you terminate Highest Daily Lifetime 7 Plus with BIO
and elect any other available living benefit you lose the guarantees that you
had accumulated under your existing benefit and we will base any guarantees
under the new benefit on your Account Value as of the date the new benefit
becomes active. As long as your Highest Daily Lifetime 7 Plus with Beneficiary
Income Option is in effect, you must allocate your Account Value in accordance
with the then permitted and available investment option(s) with this benefit.
This benefit could be elected, provided that all owners and beneficiaries are
natural persons or an agent acting for a natural person.
If you elected this death benefit, you could not elect any other optional
benefit. You may elect the Beneficiary Income Option death benefit so long as
the Annuitant is no older than age 75 at the time of election and meet the
Highest Daily Lifetime 7 Plus age
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requirements. For purposes of this optional death benefit, we calculate the
Annual Income Amount and Protected Withdrawal Value in the same manner that we
do under Highest Daily Lifetime 7 Plus itself. However, we will stop
determining the Periodic Value (as described above) on the earlier of your
first Lifetime Withdrawal after the effective date of the benefit or the Tenth
Anniversary Date. This means that under the Highest Daily Lifetime 7 Plus with
BIO benefit you will not be eligible for the guaranteed minimum Periodic
Values described above on the 20/th/ and 25/th/ Anniversary of the Benefit
Effective Date. If you choose the Highest Daily Lifetime 7 Plus with BIO, the
maximum charge is 2.00% of the greater of Account Value and the Protected
Withdrawal Value ("PWV") annually. The current charge is 1.10% annually of the
greater of the Account Value and the PWV. We deduct this charge on each
quarterly anniversary of the benefit effective date. Thus, on each such
quarterly anniversary (or the next Valuation Day, if the quarterly anniversary
is not a Valuation Day), we deduct 0.275% of the greater of the prior day's
Account Value or the prior day's Protected Withdrawal Value at the end of the
quarter. We deduct the fee pro rata from each of the Sub-accounts including
the AST Investment Grade Bond Sub-account and from the DCA Fixed Rate Option
(if applicable). Because the fee for this benefit is based on the greater of
the Account Value or the Protected Withdrawal Value, the fee for Highest Daily
Lifetime 7 Plus with the Beneficiary Income Option may be greater than it
would have been based on the Account Value alone. If the fee to be deducted
exceeds the current Account Value, we will reduce the Account Value to zero
and, continue the benefit as described below.
Upon a death that triggers payment of a death benefit under the Annuity, we
identify the following amounts: (a) the amount of the basic death benefit
under the Annuity, (b) the Protected Withdrawal Value, and (c) the Annual
Income Amount. If there were no Lifetime Withdrawals prior to the date of
death, then we calculate the Protected Withdrawal Value for purposes of this
death benefit as of the date of death, and we calculate the Annual Income
Amount as if there were a withdrawal on the date of death. If there were
Lifetime Withdrawals prior to the date of death, then we set the Protected
Withdrawal Value and Annual Income Amount for purposes of this death benefit
as of the date that we receive due proof of death.
If there is one beneficiary, he/she must choose to receive either the basic
death benefit (in a lump sum or other permitted form of distribution) or the
Beneficiary Income Option death benefit (in the form of periodic payments of
the Annual Income Amount - such payments may be annual or at other intervals
that we permit). If there are multiple beneficiaries, each beneficiary is
presented with the same choice. Each beneficiary can choose to take his/her
portion of either (a) the basic death benefit, or (b) the Beneficiary Income
Option death benefit. In order to receive the Beneficiary Income Option death
benefit, each beneficiary's share of the death benefit proceeds must be
allocated as a percentage of the total death benefit to be paid. We allow a
beneficiary who has opted to receive the Annual Income Amount to designate
another beneficiary, who would receive any remaining payments upon the former
beneficiary's death. Note also that the final payment, exhausting the
Protected Withdrawal Value, may be less than the Annual Income Amount.
Here is an example to illustrate how the death benefit may be paid:
.. Assume that (i) the basic death benefit is $50,000, the Protected
Withdrawal Value is $100,000, and the Annual Income Amount is $5,000; (ii)
there are two beneficiaries (the first designated to receive 75% of the
death benefit and the second designated to receive 25% of the death
benefit); (iii) the first beneficiary chooses to receive his/her portion of
the death benefit in the form of the Annual Income Amount, and the second
beneficiary chooses to receive his/her portion of the death benefit with
reference to the basic death benefit.
.. Under those assumptions, the first beneficiary will be paid a pro-rated
portion of the Annual Income Amount for 20 years (the 20 year pay out
period is derived from the $5,000 Annual Income Amount, paid each year
until it exhausts the entire $100,000 Protected Withdrawal Value). The
pro-rated portion of the Annual Income Amount, equal to $3,750 annually
(i.e., the first beneficiary's 75% share multiplied by $5,000), is then
paid each year for the 20 year period. Payment of $3,750 for 20 years
results in total payments of $75,000 (i.e., the first beneficiary's 75%
share of the $100,000 Protected Withdrawal Value). The second beneficiary
would receive 25% of the basic death benefit amount (or $12,500).
If you elect to terminate Highest Daily Lifetime 7 Plus with Beneficiary
Income Option, both Highest Daily Lifetime 7 Plus and that death benefit
option will be terminated. You may not terminate the death benefit option
without terminating the entire benefit. If you terminate Highest Daily
Lifetime 7 Plus with Beneficiary Income Option, your ability to elect other
optional living benefits will be affected as indicated in the "Election of and
Designations under the Benefit" section above.
HIGHEST DAILY LIFETIME 7 PLUS WITH LIFETIME INCOME ACCELERATOR/SM/
In the past, we offered a version of Highest Daily Lifetime 7 Plus called
Highest Daily Lifetime 7 Plus with Lifetime Income Accelerator ("Highest Daily
Lifetime 7 Plus with LIA"). You could choose Highest Daily Lifetime 7 Plus
with or without also electing LIA, however you could not elect LIA without
Highest Daily Lifetime 7 Plus and you could elect the LIA benefit at the time
you elect Highest Daily Lifetime 7 Plus. Please note that if you terminate
Highest Daily Lifetime 7 Plus with LIA and elect any other available living
benefit you lose the guarantees that you had accumulated under your existing
benefit and we will base any guarantees under the new benefit on your Account
Value as of the date the new benefit becomes active. If you elected this
benefit, you may not have elected any other optional benefit. As long as your
Highest Daily Lifetime 7 Plus with LIA benefit is in effect, you must allocate
your Account Value in accordance with the then permitted and available
investment option(s) with this benefit. The income benefit under Highest Daily
Lifetime 7 Plus with LIA currently is based on a single "designated life" who
was between the ages of 45 and 75 on the date that the benefit is elected. All
terms and conditions of Highest Daily Lifetime 7 Plus apply to this version of
the benefit, except as described herein.
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Highest Daily Lifetime 7 Plus with LIA is not long-term care insurance and
should not be purchased as a substitute for long-term care insurance. The
income you receive through the Lifetime Income Accelerator may be used for any
purpose, and it may or may not be sufficient to address expenses you may incur
for long-term care. You should seek professional advice to determine your
financial needs for long-term care.
Highest Daily Lifetime 7 Plus with LIA guarantees, until the death of the
single designated life, the ability to withdraw an amount equal to double the
Annual Income Amount (which we refer to as the "LIA Amount") if you meet the
conditions set forth below. If you choose the Highest Daily Lifetime 7 Plus
with LIA, the maximum charge is 2.00% of the greater of Account Value and the
Protected Withdrawal Value ("PWV") annually. The current charge is 1.10%
annually of the greater of Account Value and the PWV. We deduct this charge on
each quarterly anniversary of the benefit effective date. Thus, on each such
quarterly anniversary (or the next Valuation Day, if the quarterly anniversary
is not a Valuation Day), we deduct 0.275% of the greater of the prior day's
Account Value, or the prior day's Protected Withdrawal Value at the end of the
quarter. We deduct the fee pro rata from each of the Sub-accounts including
the AST Investment Grade Bond Sub-account and the DCA Fixed Rate Option (if
applicable). Since this fee is based on the greater of Account Value and the
Protected Withdrawal Value, the fee for Highest Daily Lifetime 7 Plus with LIA
may be greater than it would have been, had it been based on the Account Value
alone. If the fee to be deducted exceeds the current Account Value, we will
reduce the Account Value to zero, and continue the benefit as described below.
If this benefit is being elected on an Annuity held as a 403(b) plan, then in
addition to meeting the eligibility requirements listed below for the LIA
Amount you must separately qualify for distributions from the 403(b) plan
itself.
ELIGIBILITY REQUIREMENTS FOR LIA AMOUNT. Both a waiting period of 36 months
from the benefit effective date, and an elimination period of 120 days from
the date of notification that one or both of the requirements described
immediately below have been met, apply before you can become eligible for the
LIA Amount. Assuming the 36 month waiting period has been met and we have
received the notification referenced in the immediately preceding sentence,
the LIA amount would be available for withdrawal on the Valuation Day
immediately after the 120/th/ day. The waiting period and the elimination
period may run concurrently. In addition to satisfying the waiting and
elimination period, at least one of the following requirements ("LIA
conditions") must be met.
(1)The designated life is confined to a qualified nursing facility. A
qualified nursing facility is a facility operated pursuant to law or any
state licensed facility providing medically necessary in-patient care which
is prescribed by a licensed physician in writing and based on physical
limitations which prohibit daily living in a non-institutional setting.
(2)The designated life is unable to perform two or more basic abilities of
caring for oneself or "activities of daily living." We define these basic
abilities as:
i. Eating: Feeding oneself by getting food into the body from a receptacle
(such as a plate, cup or table) or by a feeding tube or intravenously.
ii.Dressing: Putting on and taking off all items of clothing and any
necessary braces, fasteners or artificial limbs.
iii.Bathing: Washing oneself by sponge bath; or in either a tub or shower,
including the task of getting into or out of the tub or shower.
iv.Toileting: Getting to and from the toilet, getting on and off the
toilet, and performing associated personal hygiene.
v. Transferring: Moving into or out of a bed, chair or wheelchair.
vi.Continence: Maintaining control of bowel or bladder function; or when
unable to maintain control of bowel or bladder function, the ability to
perform personal hygiene (including caring for catheter or colostomy
bag).
You must notify us when the LIA conditions have been met. If, when we receive
such notification, there are more than 120 days remaining until the end of the
waiting period described above, you will not be eligible for the LIA Amount.
If there are 120 days or less remaining until the end of the waiting period
when we receive notification that the LIA conditions are met, we will
determine eligibility for the LIA Amount through our then current
administrative process, which may include, but is not limited to,
documentation verifying the LIA conditions and/or an assessment by a third
party of our choice. Such assessment may be in person and we will assume any
costs associated with the aforementioned assessment. Once eligibility is
determined, the LIA Amount is equal to double the Annual Income Amount as
described above under the Highest Daily Lifetime 7 Plus benefit.
Additionally, once eligibility is determined, we will reassess your
eligibility on an annual basis although your LIA benefit for the year that
immediately precedes our reassessment will not be affected if it is determined
that you are no longer eligible. Your first reassessment may occur in the same
year as your initial assessment. If we determine that you are no longer
eligible to receive the LIA Amount, upon the next Annuity Anniversary the
Annual Income Amount would replace the LIA Amount. However, if you were
receiving income based on the LIA Amount and do not take action to change your
withdrawal amount to your Annual Income Amount, any cumulative Lifetime
Withdrawals in an Annuity Year that are in excess of the Annual Income Amount
will impact your Annual Income Amount in subsequent years (except with regard
to Required Minimum Distributions for this Annuity that comply with our
rules). Please note that we will not change your current withdrawal amount
unless you instruct us to do so. If you wish to establish or make changes to
your existing withdrawal program to ensure that you are not taking Excess
Income, please contact our Annuity Service Office. There is no limit on the
number of times you can become eligible for the LIA Amount,
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however, each time would require the completion of the 120-day elimination
period, notification that the designated life meets the LIA conditions, and
determination, through our then current administrative process, that you are
eligible for the LIA Amount, each as described above.
LIA AMOUNT AT THE FIRST LIFETIME WITHDRAWAL. If your first Lifetime Withdrawal
subsequent to election of Highest Daily Lifetime 7 Plus with LIA occurs while
you are eligible for the LIA Amount, the available LIA Amount is equal to
double the Annual Income Amount.
LIA AMOUNT AFTER THE FIRST LIFETIME WITHDRAWAL. If you become eligible for the
LIA Amount after you have taken your first Lifetime Withdrawal, the available
LIA amount for the current and subsequent Annuity Years is equal to double the
then current Annual Income Amount, however the available LIA amount in the
current Annuity Year is reduced by any Lifetime Withdrawals that have been
taken in the current Annuity Year. Cumulative Lifetime Withdrawals in an
Annuity Year which are less than or equal to the LIA Amount (when eligible for
the LIA amount) will not reduce your LIA Amount in subsequent Annuity Years,
but any such withdrawals will reduce the LIA Amount on a dollar-for-dollar
basis in that Annuity Year.
WITHDRAWALS IN EXCESS OF THE LIA AMOUNT. If your cumulative Lifetime
Withdrawals in an Annuity Year are in excess of the LIA Amount when you are
eligible ("Excess Withdrawal"), your LIA Amount in subsequent years will be
reduced (except with regard to required minimum distributions) by the result
of the ratio of the excess portion of the withdrawal to the Account Value
immediately prior to the Excess Withdrawal. Reductions include the actual
amount of the withdrawal. Withdrawals of any amount (excluding the
Non-Lifetime Withdrawal) up to and including the LIA Amount will reduce the
Protected Withdrawal Value by the amount of the withdrawal. Excess Withdrawals
will reduce the Protected Withdrawal Value by the same ratio as the reduction
to the LIA Amount.
Withdrawals are not required. However, subsequent to the first Lifetime
Withdrawal, the LIA Amount is not increased in subsequent Annuity Years if you
decide not to take a withdrawal in an Annuity Year or take withdrawals in an
Annuity Year that in total are less than the LIA Amount.
PURCHASE PAYMENTS. If you are eligible for the LIA Amount as described under
"Eligibility Requirements for LIA Amount" and you make an additional Purchase
Payment, we will increase your LIA Amount by double the amount we add to your
Annual Income Amount.
STEP UPS. If your Annual Income Amount is stepped up, your LIA Amount will be
stepped up to equal double the stepped up Annual Income Amount.
GUARANTEE PAYMENTS. If your Account Value is reduced to zero as a result of
cumulative withdrawals that are equal to or less than the LIA Amount when you
are eligible, or as a result of the fee that we assess for Highest Daily
Lifetime 7 Plus with LIA, and there is still a LIA Amount available, we will
make an additional payment for that Annuity Year equal to the remaining LIA
Amount. If you have not begun taking Lifetime Withdrawals and your Account
Value is reduced to zero as a result of the fee we assess for Highest Daily
Lifetime 7 Plus with LIA, we will calculate the Annual Income Amount and any
LIA amount if you are eligible, as if you made your first Lifetime Withdrawal
on the date the Account Value was reduced to zero and Lifetime Withdrawals
will begin on the next Annuity Anniversary. If this were to occur, you are not
permitted to make additional purchase payments to your Annuity. Thus, in these
scenarios, the remaining LIA Amount would be payable even though your Account
Value was reduced to zero. In subsequent Annuity Years we make payments that
equal the LIA Amount as described in this section. We will make payments until
the death of the single designated life. Should the designated life no longer
qualify for the LIA amount (as described under "Eligibility Requirements for
LIA Amount" above), the Annual Income Amount would continue to be available.
Subsequent eligibility for the LIA Amount would require the completion of the
120 day elimination period as well as meeting the LIA conditions listed above
under "Eligibility Requirements for LIA Amount". To the extent that cumulative
withdrawals in the current Annuity Year that reduce your Account Value to zero
are more than the LIA Amount (except in the case of required minimum
distributions), Highest Daily Lifetime 7 Plus with LIA terminates, and no
additional payments are made.
ANNUITY OPTIONS. In addition to the Highest Daily Lifetime 7 Plus Annuity
Options described above, after the Tenth Anniversary you may also request that
we make annuity payments each year equal to the Annual Income Amount. In any
year that you are eligible for the LIA Amount, we make annuity payments equal
to the LIA Amount. If you would receive a greater payment by applying your
Account Value to receive payments for life under your Annuity, we will pay the
greater amount. Annuitization prior to the Tenth Anniversary will forfeit any
present or future LIA amounts. We will continue to make payments until the
death of the Designated Life. If this option is elected, the Annual Income
Amount and LIA Amount will not increase after annuity payments have begun.
If you elect Highest Daily Lifetime 7 Plus with LIA, and never meet the
eligibility requirements you will not receive any additional payments based on
the LIA Amount.
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SPOUSAL HIGHEST DAILY LIFETIME 7 PLUS INCOME BENEFIT (SHD7 PLUS)
Spousal Highest Daily Lifetime 7 Plus is the spousal version of Highest Daily
Lifetime 7 Plus. We no longer offer Spousal Highest Daily Lifetime 7 Plus. If
you elected Spousal Highest Daily Lifetime 7 Plus and subsequently terminate
the benefit, you may elect another available living benefit, subject to our
current rules. See "Termination of Existing Benefits and Election New
Benefits". Please note that if you terminate Spousal Highest Daily Lifetime 7
Plus and elect another benefit, you lose the guarantees that you had
accumulated under your existing benefit and we will base any guarantees under
the new benefit on your Account Value as of the date the new benefit becomes
active. Spousal Highest Daily Lifetime 7 Plus could have been elected based on
two Designated Lives, as described below. The youngest Designated Life must
have been at least 50 years old and the oldest Designated Life must have been
at least 55 years old when the benefit was elected. Spousal Highest Daily
Lifetime 7 Plus is not available if you elected any other optional benefit. As
long as your Spousal Highest Daily Lifetime 7 Plus Benefit is in effect, you
must allocate your Account Value in accordance with the then permitted and
available investment option(s) with this benefit. For a more detailed
description of permitted investment options, see the "Investment Options"
section in this prospectus.
We previously offered a benefit that guarantees until the later death of two
natural persons who are each other's spouses at the time of election of the
benefit and at the first death of one of them (the "Designated Lives", and
each, a "Designated Life") the ability to withdraw an annual amount (the
"Annual Income Amount") equal to a percentage of an initial principal value
(the "Protected Withdrawal Value") regardless of the impact of Sub-account
performance on the Account Value, subject to our rules regarding the timing
and amount of withdrawals. You are guaranteed to be able to withdraw the
Annual Income Amount for the lives of the Designated Lives ("Lifetime
Withdrawals") provided you have not made "excess withdrawals" that have
resulted in your Account Value being reduced to zero. We also permit a
one-time Non-Lifetime Withdrawal from your Annuity prior to taking Lifetime
Withdrawals under the benefit. The benefit may be appropriate if you intend to
make periodic withdrawals from your Annuity, wish to ensure that Sub-account
performance will not affect your ability to receive annual payments, and wish
either spouse to be able to continue the Spousal Highest Daily Lifetime 7 Plus
benefit after the death of the first spouse. You are not required to make
withdrawals as part of the benefit - the guarantees are not lost if you
withdraw less than the maximum allowable amount each year under the rules of
the benefit. As discussed below, we require that you participate in our
pre-determined mathematical formula in order to participate in Spousal Highest
Daily Lifetime 7 Plus. Withdrawals are taken first from your own Account
Value. We are only required to begin making lifetime income payments to you
under our guarantee when and if your Account Value is reduced to zero (unless
the benefit has terminated).
Although you are guaranteed the ability to withdraw your Annual Income Amount
for life even if your Account Value falls to zero, if you take an excess
withdrawal that brings your Account Value to zero, it is possible that your
Annual Income Amount could also fall to zero. In that scenario, no further
amount would be payable under Spousal Highest Daily Lifetime 7 Plus.
KEY FEATURE - PROTECTED WITHDRAWAL VALUE
The Protected Withdrawal Value is used to calculate the initial Annual Income
Amount. The Protected Withdrawal Value is separate from your Account Value and
not available as cash or a lump sum. On the effective date of the benefit, the
Protected Withdrawal Value is equal to your Account Value. On each Valuation
Day thereafter until the date of your first Lifetime Withdrawal (excluding any
Non-Lifetime Withdrawal discussed below), the Protected Withdrawal Value is
equal to the "Periodic Value" described in the next paragraph.
The "Periodic Value" initially is equal to the Account Value on the effective
date of the benefit. On each Valuation Day thereafter until the first Lifetime
Withdrawal, we recalculate the Periodic Value. We stop determining the
Periodic Value upon your first Lifetime Withdrawal after the effective date of
the benefit. On each Valuation Day (the "Current Valuation Day"), the Periodic
Value is equal to the greater of:
(1)the Periodic Value for the immediately preceding business day (the "Prior
Valuation Day") appreciated at the daily equivalent of 7% annually during
the calendar day(s) between the Prior Valuation Day and the Current
Valuation Day (i.e., one day for successive Valuation Days, but more than
one calendar day for Valuation Days that are separated by weekends and/or
holidays), plus the amount of any adjusted Purchase Payment made on the
Current Valuation Day (the Periodic Value is proportionally reduced for any
Non-Lifetime Withdrawal); and
(2)the Account Value.
If you have not made a Lifetime Withdrawal on or before the 10/th/, 20/th/, or
25/th/ Anniversary of the effective date of the benefit, your Periodic Value
on the 10/th/, 20/th/, or 25/th/ Anniversary of the benefit effective date is
equal to the greater of:
(1)the Periodic Value described above or,
(2)the sum of (a), (b) and (c) (proportionally reduced for any Non-Lifetime
Withdrawal):
(a)200% (on the 10/th/ anniversary), 400% (on the 20/th/ anniversary) or
600% (on the 25/th/ anniversary) of the Account Value on the effective
date of the benefit;
(b)200% (on the 10/th/ anniversary), 400% (on the 20/th/ anniversary) or
600% (on the 25/th/ anniversary) of all adjusted Purchase Payments made
within one year following the effective date of the benefit; and
(c)All adjusted Purchase Payments made after one year following the
effective date of the benefit.
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If you elect Spousal Highest Daily Lifetime 7 Plus with Beneficiary Income
Option ("BIO") (see below), we will stop determining the Periodic Value (as
described above) on the earlier of your first Lifetime Withdrawal after the
effective date of the benefit or the Tenth Anniversary of the effective date
of the benefit ("Tenth Anniversary"). This means that under the Spousal
Highest Daily Lifetime 7 Plus with BIO benefit you will not be eligible for
the guaranteed minimum Periodic Values described above on the 20/th/ and
25/th/ Anniversary of the Benefit Effective Date.
On and after the date of your first Lifetime Withdrawal, your Protected
Withdrawal Value is increased by the amount of any subsequent Purchase
Payments, is reduced by withdrawals, including your first Lifetime Withdrawal
(as described below), and may be increased if you qualify for a step-up (as
described below).
RETURN OF PRINCIPAL GUARANTEE
If you have not made a Lifetime Withdrawal before the Tenth Anniversary, we
will increase your Account Value on that Tenth Anniversary (or the next
Valuation Day, if that anniversary is not a Valuation Day), if the
requirements set forth in this paragraph are met. On the Tenth Anniversary, we
add:
a) your Account Value on the day that you elected Spousal Highest Daily
Lifetime 7 Plus proportionally reduced for any Non-Lifetime Withdrawal; and
b) the sum of each Purchase Payment proportionally reduced for any subsequent
Non-Lifetime Withdrawal you made during the one-year period after you
elected the benefit.
If the sum of (a) and (b) is greater than your Account Value on the Tenth
Anniversary, we increase your Account Value to equal the sum of (a) and (b),
by contributing funds from our general account. If the sum of (a) and (b) is
less than or equal to your Account Value on the Tenth Anniversary, we make no
such adjustment. The amount that we add to your Account Value under this
provision will be allocated to each of your variable investment options
(including the AST Investment Grade Bond Sub-account used with this benefit),
in the same proportion that each such Sub-account bears to your total Account
Value, immediately before the application of the amount. Any such amount will
not be considered a Purchase Payment when calculating your Protected
Withdrawal Value, your death benefit, or the amount of any optional benefit
that you may have selected, and therefore will have no direct impact on any
such values at the time we add this amount. Because the amount is added to
your Account Value, it will also be subject to each charge under your Annuity
based on Account Value. This potential addition to Account Value is available
only if you have elected Spousal Highest Daily Lifetime 7 Plus and if you meet
the conditions set forth in this paragraph. Thus, if you take a withdrawal,
including a required minimum distribution, (other than a Non-Lifetime
Withdrawal) prior to the Tenth Anniversary, you are not eligible to receive
the Return of Principal Guarantee. The Return of Principal Guarantee is
referred to as the Guaranteed Minimum Account Value Credit in the benefit
rider.
KEY FEATURE - ANNUAL INCOME AMOUNT UNDER THE SPOUSAL HIGHEST DAILY LIFETIME 7
PLUS BENEFIT
The Annual Income Amount is equal to a specified percentage of the Protected
Withdrawal Value at the first Lifetime Withdrawal and does not reduce in
subsequent Annuity Years, as described below. The percentage initially depends
on the age of the youngest Designated Life on the date of the first Lifetime
Withdrawal after election of the benefit. The percentages are: 4% for ages 50
- less than 59 1/2, 5% for ages 59 1/2 - 79, 6% for ages 80 to 84, 7% for ages
85 to 89, and 8% for ages 90 and older. We use the age of the youngest
Designated Life even if that Designated Life is no longer a participant under
the Annuity due to death or divorce.
Under the Spousal Highest Daily Lifetime 7 Plus benefit, if your cumulative
Lifetime Withdrawals in an Annuity Year are less than or equal to the Annual
Income Amount, they will not reduce your Annual Income Amount in subsequent
Annuity Years, but any such withdrawals will reduce the Annual Income Amount
on a dollar-for-dollar basis in that Annuity Year. If your cumulative Lifetime
Withdrawals in an Annuity Year are in excess of the Annual Income Amount for
any Annuity Year ("Excess Income"), your Annual Income Amount in subsequent
years will be reduced (except with regard to required minimum distributions
for this Annuity that comply with our rules) by the result of the ratio of the
Excess Income to the Account Value immediately prior to such withdrawal (see
examples of this calculation below). Reductions are based on the actual amount
of the withdrawal. Lifetime Withdrawals of any amount up to and including the
Annual Income Amount will reduce the Protected Withdrawal Value by the amount
of the withdrawal. Withdrawals of Excess Income will reduce the Protected
Withdrawal Value by the same ratio as the reduction to the Annual Income
Amount.
You may use the Systematic Withdrawal program to make withdrawals of the
Annual Income Amount. Any systematic withdrawal will be deemed a Lifetime
Withdrawal under this benefit.
Any Purchase Payment that you make subsequent to the election of Spousal
Highest Daily Lifetime 7 Plus will (i) increase the then-existing Annual
Income Amount by an amount equal to a percentage of the Purchase Payment based
on the age of the younger Annuitant at the time of the first Lifetime
Withdrawal (the percentages are: 4% for ages 50 - less than 59 1/2, 5% for
ages 59 1/2 - 79, 6% for ages 80-84, 7% for ages 85-89, and 8% for ages 90 and
older), and (ii) increase the Protected Withdrawal Value by the amount of the
Purchase Payment.
If your Annuity permits additional purchase payments, we may limit any
additional purchase payment(s) if we determine that as a result of the timing
and amounts of your additional purchase payments and withdrawals, the Annual
Income Amount is being
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increased in an unintended fashion. Among the factors we will use in making a
determination as to whether an action is designed to increase the Annual
Income Amount in an unintended fashion is the relative size of additional
purchase payment(s). Subject to state law, we reserve the right to not accept
additional purchase payments if we are not then offering this benefit for new
elections. We will exercise such reservation of right for all annuity
purchasers in the same class in a nondiscriminatory manner.
HIGHEST DAILY AUTO STEP-UP
An automatic step-up feature ("Highest Daily Auto Step-Up") is part of this
benefit. As detailed in this paragraph, the Highest Daily Auto Step-Up feature
can result in a larger Annual Income Amount subsequent to your first Lifetime
Withdrawal. The Highest Daily Step-Up starts with the anniversary of the Issue
Date of the Annuity (the "Annuity Anniversary") immediately after your first
Lifetime Withdrawal under the benefit. Specifically, upon the first such
Annuity Anniversary, we identify the Account Value on each Valuation Day
within the immediately preceding Annuity Year after your first Lifetime
Withdrawal. Having identified the highest daily value (after all daily values
have been adjusted for subsequent purchase payments and withdrawals), we then
multiply that value by a percentage that varies based on the age of the
youngest Designated Life on the Annuity Anniversary as of which the step-up
would occur. The percentages are 4% for ages 50 - less than 59 1/2, 5% for
ages 59 1/2 - 79, 6% for ages 80-84, 7% for ages 85-89, and 8% for ages 90 and
older. If that value exceeds the existing Annual Income Amount, we replace the
existing amount with the new, higher amount. Otherwise, we leave the existing
Annual Income Amount intact. The Account Value on the Annuity Anniversary is
considered the last daily step-up value of the Annuity Year. In later years
(i.e., after the first Annuity Anniversary after the first Lifetime
Withdrawal), we determine whether an automatic step-up should occur on each
Annuity Anniversary by performing a similar examination of the Account Values
that occurred on Valuation Days during the year. At the time that we increase
your Annual Income Amount, we also increase your Protected Withdrawal Value to
equal the highest daily value upon which your step-up was based only if that
results in an increase to the Protected Withdrawal Value. Your Protected
Withdrawal Value will never be decreased as a result of an income step-up. If,
on the date that we implement a Highest Daily Auto Step-Up to your Annual
Income Amount, the charge for Spousal Highest Daily Lifetime 7 Plus has
changed for new purchasers, you may be subject to the new charge at the time
of such step-up. Prior to increasing your charge for Spousal Highest Daily
Lifetime 7 Plus upon a step-up, we would notify you, and give you the
opportunity to cancel the automatic step-up feature. If you receive notice of
a proposed step-up and accompanying fee increase, you should carefully
evaluate whether the amount of the step-up justifies the increased fee to
which you will be subject.
If you establish a Systematic Withdrawal program, we will not automatically
increase the withdrawal amount when there is an increase to the Annual Income
Amount.
The Spousal Highest Daily Lifetime 7 Plus benefit does not affect your ability
to make withdrawals under your Annuity, or limit your ability to request
withdrawals that exceed the Annual Income Amount. Under Spousal Highest Daily
Lifetime 7 Plus, if your cumulative Lifetime Withdrawals in an Annuity Year
are less than or equal to the Annual Income Amount, they will not reduce your
Annual Income Amount in subsequent Annuity Years, but any such withdrawals
will reduce the Annual Income Amount on a dollar-for-dollar basis in that
Annuity Year.
If, cumulatively, you withdraw an amount less than the Annual Income Amount in
any Annuity Year, you cannot carry-over the unused portion of the Annual
Income Amount to subsequent Annuity Years.
Because each of the Protected Withdrawal Value and Annual Income Amount is
determined in a way that is not solely related to Account Value, it is
possible for the Account Value to fall to zero, even though the Annual Income
Amount remains.
Examples of dollar-for-dollar and proportional reductions, and the Highest
Daily Auto Step-Up are set forth below. The values shown here are purely
hypothetical, and do not reflect the charges for the Spousal Highest Daily
Lifetime 7 Plus benefit or any other fees and charges. Assume the following
for all three examples:
.. The Issue Date is December 1, 2008
.. The Spousal Highest Daily Lifetime 7 Plus benefit is elected on March 5,
2009
.. The younger Designated Life was 70 years old when he/she elected the
Spousal Highest Daily Lifetime 7 Plus benefit.
EXAMPLE OF DOLLAR-FOR-DOLLAR REDUCTIONS
On November 24, 2009, the Protected Withdrawal Value is $120,000, resulting in
an Annual Income Amount of $6,000 (since the youngest designated life is
between the ages of 59 1/2 and 79 at the time of the first Lifetime
Withdrawal, the Annual Income Amount is 5% of the Protected Withdrawal Value,
in this case 5% of $120,000). Assuming $2,500 is withdrawn from the Annuity on
this date, the remaining Annual Income Amount for that Annuity Year (up to and
including December 1, 2009) is $3,500. This is the result of a
dollar-for-dollar reduction of the Annual Income Amount ($6,000 less $2,500 =
$3,500).
EXAMPLE OF PROPORTIONAL REDUCTIONS
Continuing the previous example, assume an additional withdrawal of $5,000
occurs on November 27, 2009 and the Account Value at the time and immediately
prior to this withdrawal is $118,000. The first $3,500 of this withdrawal
reduces the Annual Income Amount for that Annuity Year to $0. The remaining
withdrawal amount of $1,500 - reduces the Annual Income Amount in future
Annuity Years on a proportional basis based on the ratio of the excess
withdrawal to the Account Value immediately prior to
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the excess withdrawal. (Note that if there were other withdrawals in that
Annuity Year, each would result in another proportional reduction to the
Annual Income Amount).
HERE IS THE CALCULATION:
Account Value before Lifetime Withdrawal $118,000.00
Less amount of "non" excess withdrawal $ 3,500.00
Account Value immediately before excess withdrawal of $1,500 $114,500.00
Excess withdrawal amount $ 1,500.00
Divided by Account Value immediately before excess withdrawal $114,500.00
Ratio 1.31%
Annual Income Amount $ 6,000.00
Less ratio of 1.31% $ 78.60
Annual Income Amount for future Annuity Years $ 5,921.40
EXAMPLE OF HIGHEST DAILY AUTO STEP-UP
On each Annuity Anniversary date, the Annual Income Amount is stepped-up if
the appropriate percentage (based on the youngest Designated Life's age on the
Annuity Anniversary) of the highest daily value since your first Lifetime
Withdrawal (or last Annuity Anniversary in subsequent years), adjusted for
withdrawals and additional Purchase Payments, is higher than the Annual Income
Amount, adjusted for excess withdrawals and additional Purchase Payments.
Continuing the same example as above, the Annual Income Amount for this
Annuity Year is $6,000. However, the excess withdrawal on November 27 reduces
the amount to $5,921.40 for future years (see above). For the next Annuity
Year, the Annual Income Amount will be stepped up if 5% (since the youngest
Designated Life is between 59 1/2 and 79 on the date of the potential step-up)
of the highest daily Account Value adjusted for withdrawals and Purchase
Payments, is higher than $5921.40. Here are the calculations for determining
the daily values. Only the November 25 value is being adjusted for excess
withdrawals as the November 30 and December 1 Valuation Days occur after the
excess withdrawal on November 27.
HIGHEST DAILY VALUE
(ADJUSTED WITH ADJUSTED ANNUAL INCOME
WITHDRAWAL AND PURCHASE AMOUNT (5% OF THE
DATE* ACCOUNT VALUE PAYMENTS)** HIGHEST DAILY VALUE)
----- ------------- ----------------------- ----------------------
November 25, 2009 $119,000.00 $ 119,000.00 $5,950.00
November 26, 2009 Thanksgiving Day
November 27, 2009 $113,000.00 $ 113,986.95 $5,699.35
November 30, 2009 $113,000.00 $ 113,986.95 $5,699.35
December 01, 2009 $119,000.00 $ 119,000.00 $5,950.00
* In this example, the Annuity Anniversary date is December 1. The Valuation
Dates are every day following the first Lifetime Withdrawal. In subsequent
Annuity Years Valuation Dates will be every day following the Annuity
Anniversary. The Annuity Anniversary Date of December 1 is considered the
final Valuation Date for the Annuity Year.
** In this example, the first daily value after the first Lifetime Withdrawal
is $119,000 on November 25, resulting in an adjusted Annual Income Amount
of $5,950.00. This amount is adjusted on November 27 to reflect the $5,000
withdrawal. The calculations for the adjustments are:
. The Account Value of $119,000 on November 25 is first reduced
dollar-for-dollar by $3,500 ($3,500 is the remaining Annual Income
Amount for the Annuity Year), resulting in an adjusted Account Value of
$115,500 before the excess withdrawal.
. This amount ($115,500) is further reduced by 1.31% (this is the ratio in
the above example which is the excess withdrawal divided by the Account
Value immediately preceding the excess withdrawal) resulting in a
Highest Daily Value of $113,986.95.
. The adjusted Annual Income Amount is carried forward to the next
Valuation Date of November 30. At this time, we compare this amount to
5% of the Account Value on November 30. Since the November 27 adjusted
Annual Income Amount of $5,699.35 is higher than $5,650.00 (5% of
$113,000), we continue to carry $5,699.35 forward to the next and final
Valuation Date of December 1. The Account Value on December 1 is
$119,000 and 5% of this amount is $5,950. Since this is higher than
$5,699.35, the adjusted Annual Income Amount is reset to $5,950.00.
In this example, 5% of the December 1 value results in the highest amount of
$5,950.00. Since this amount is higher than the current year's Annual Income
Amount of $5,921.40 adjusted for excess withdrawals, the Annual Income Amount
for the next Annuity Year, starting on December 2, 2009 and continuing through
December 1, 2010, will be stepped-up to $5,950.00.
NON-LIFETIME WITHDRAWAL FEATURE
You may take a one-time non-lifetime withdrawal ("Non-Lifetime Withdrawal")
under Spousal Highest Daily Lifetime 7 Plus. It is an optional feature of the
benefit that you can only elect at the time of your first withdrawal. You
cannot take a Non-Lifetime Withdrawal in an amount that would cause your
Annuity's Account Value, after taking the withdrawal, to fall below the
minimum Surrender Value (see "Access to Account Value - Can I Surrender My
Annuity for Its Value?"). This Non-Lifetime Withdrawal will not establish your
initial Annual Income Amount and the Periodic Value above will continue to be
calculated. However, the total amount of the withdrawal will proportionally
reduce all guarantees associated with the Spousal Highest Daily Lifetime 7 Plus
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benefit. You must tell us if your withdrawal is intended to be the
Non-Lifetime Withdrawal and not the first Lifetime Withdrawal under the
Spousal Highest Daily Lifetime 7 Plus benefit. If you don't elect the
Non-Lifetime Withdrawal, the first withdrawal you make will be the first
Lifetime Withdrawal that establishes your Protected Withdrawal Value and
Annual Income Amount. Once you elect the Non-Lifetime Withdrawal or Lifetime
Withdrawals, no additional Non-Lifetime Withdrawals may be taken.
The Non-Lifetime Withdrawal will proportionally reduce the Protected
Withdrawal Value and the Return of Principal guarantee. It will also
proportionally reduce the Periodic Value guarantees on the tenth, twentieth
and twenty-fifth anniversaries of the benefit effective date (see description
in "Key Feature - Protected Withdrawal Value," above). It will reduce all
three by the percentage the total withdrawal amount (including any applicable
CDSC) represents of the then current Account Value immediately prior to the
time of the withdrawal.
If you are participating in a Systematic Withdrawal program, the first
withdrawal under the program cannot be classified as the Non-Lifetime
Withdrawal. The first partial withdrawal in payment of any third party
investment advisory service from your Annuity also cannot be classified as the
Non-Lifetime Withdrawal.
EXAMPLE - NON-LIFETIME WITHDRAWAL (PROPORTIONAL REDUCTION)
This example is purely hypothetical and does not reflect the charges for the
benefit or any other fees and charges. It is intended to illustrate the
proportional reduction of the Non-Lifetime Withdrawal under this benefit.
Assume the following:
.. The Issue Date is December 1, 2008
.. The Spousal Highest Daily Lifetime 7 Plus benefit is elected on March 5,
2009
.. The Account Value at benefit election was $105,000
.. The younger Designated Life was 70 years old when he/she elected the
Spousal Highest Daily Lifetime 7 Plus benefit.
.. No previous withdrawals have been taken under the Spousal Highest Daily
Lifetime 7 Plus benefit.
On May 2, 2009, the Protected Withdrawal Value is $125,000, the 10/th/ benefit
year minimum Periodic Value guarantee is $210,000, the 10/th/ benefit year
Return of Principal guarantee is $105,000, the 20/th/ benefit year minimum
Periodic Value guarantee is $420,000, the 25/th/ benefit year minimum Periodic
Value guarantee is $630,000 and the Account Value is $120,000. Assuming
$15,000 is withdrawn from the Annuity on May 2, 2009 and is designated as a
Non-Lifetime Withdrawal, all guarantees associated with the Spousal Highest
Daily Lifetime 7 Plus benefit will be reduced by the ratio the total
withdrawal amount represents of the Account Value just prior to the withdrawal
being taken.
HERE IS THE CALCULATION:
Withdrawal Amount divided by $ 15,000
Account Value before withdrawal $120,000
Equals ratio 12.5%
All guarantees will be reduced by the above ratio (12.5%)
Protected Withdrawal Value $109,375
10/th/ benefit year Return of Principal $ 91,875
10/th/ benefit year Minimum Periodic Value $183,750
20/th/ benefit year Minimum Periodic Value $367,500
25/th/ benefit year Minimum Periodic Value $551,250
REQUIRED MINIMUM DISTRIBUTIONS
Withdrawals that exceed the Annual Income Amount, but which you are required
to take as a required minimum distribution for this Annuity, will not reduce
the Annual Income Amount for future years. No additional Annual Income Amounts
will be available in an Annuity Year due to required minimum distributions
unless the required minimum distribution amount is greater than the Annual
Income Amount. Any withdrawal you take that exceeds the Annual Income Amount
in Annuity Years that your required minimum distribution amount is not greater
than the Annual Income Amount will be treated as an Excess Withdrawal under
the benefit. If the required minimum distribution (as calculated by us for
your Annuity and not previously withdrawn in the current calendar year) is
greater than the Annual Income Amount, an amount equal to the remaining Annual
Income Amount plus the difference between the required minimum distribution
amount not previously withdrawn in the current calendar year and the Annual
Income Amount will be available in the current Annuity Year without it being
considered an excess withdrawal. In the event that a required minimum
distribution is calculated in a calendar year that crosses more than one
Annuity Year and you choose to satisfy the entire required minimum
distribution for that calendar year in the next Annuity Year, the distribution
taken in the next Annuity Year will reduce your Annual Income Amount in that
Annuity Year on a dollar for dollar basis. If the required minimum
distribution not taken in the prior Annuity Year is greater than the Annual
Income Amount as guaranteed by the benefit in the current Annuity Year, the
total required minimum distribution amount may be taken without being treated
as an excess withdrawal.
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EXAMPLE - REQUIRED MINIMUM DISTRIBUTIONS
The following example is purely hypothetical and is intended to illustrate a
scenario in which the required minimum distribution amount in a given Annuity
Year is greater than the Annual Income Amount.
Annual Income Amount = $5,000
Remaining Annual Income Amount = $3,000
Required Minimum Distribution = $6,000
The amount you may withdraw in the current Annuity Year without it being
treated as an Excess Withdrawal is $4,000. ($3,000 + ($6,000 - $5,000) =
$4,000).
If the $4,000 withdrawal is taken, the remaining Annual Income Amount will be
zero and the remaining required minimum distribution amount of $2,000 may be
taken in the subsequent Annuity Year (when your Annual Income Amount is reset
to $5,000) without proportionally reducing all guarantees associated with the
Spousal Highest Daily Lifetime 7 Plus benefit as described above. The amount
you may withdraw in the subsequent Annuity Year if you choose not to satisfy
the required minimum distribution in the current Annuity Year (assuming the
Annual Income Amount in the subsequent Annuity Year is $5,000) without being
treated as an Excess Withdrawal is $6,000. This withdrawal must comply with
all IRS guidelines in order to satisfy the required minimum distribution for
the current calendar year.
BENEFITS UNDER SPOUSAL HIGHEST DAILY LIFETIME 7 PLUS
.. To the extent that your Account Value was reduced to zero as a result of
cumulative Lifetime Withdrawals in an Annuity Year that are equal to or
less than the Annual Income Amount or as a result of the fee that we assess
for Spousal Highest Daily Lifetime 7 Plus, and amounts are still payable
under Spousal Highest Daily Lifetime 7 Plus, we will make an additional
payment, if any, for that Annuity Year equal to the remaining Annual Income
Amount for the Annuity Year. If you have not begun taking Lifetime
Withdrawals and your Account Value is reduced to zero as a result of the
fee we assess for Spousal Highest Daily Lifetime 7 Plus, we will calculate
the Annual Income Amount as if you made your first Lifetime Withdrawal on
the date the Account Value was reduced to zero and Lifetime Withdrawals
will begin on the next Annuity Anniversary. If this were to occur, you are
not permitted to make additional purchase payments to your Annuity. Thus,
in these scenarios, the remaining Annual Income Amount would be payable
even though your Account Value was reduced to zero. In subsequent Annuity
Years we make payments that equal the Annual Income Amount as described in
this section. We will make payments until the death of the first of the
Designated Lives to die, and will continue to make payments until the death
of the second Designated Life as long as the Designated Lives were spouses
at the time of the first death. To the extent that cumulative withdrawals
in the Annuity Year that reduced your Account Value to zero are more than
the Annual Income Amount, the Spousal Highest Daily Lifetime 7 Plus benefit
terminates, and no additional payments will be made. However, if a
withdrawal in the latter scenario was taken to satisfy a required minimum
distribution under the Annuity the benefit will not terminate, and we will
continue to pay the Annual Income Amount in subsequent Annuity Years until
the death of the second Designated Life provided the Designated lives were
spouses at the death of the first Designated Life.
.. If Annuity payments are to begin under the terms of your Annuity, or if you
decide to begin receiving Annuity payments and there is an Annual Income
Amount due in subsequent Annuity Years, you can elect one of the following
two options:
(1)apply your Account Value to any Annuity option available; or
(2)request that, as of the date Annuity payments are to begin, we make
Annuity payments each year equal to the Annual Income Amount. We will
make payments until the first of the Designated Lives to die, and
will continue to make payments until the death of the second
Designated Life as long as the Designated Lives were spouses at the
time of the first death. If, due to death of a Designated Life or
divorce prior to annuitization, only a single Designated Life
remains, then Annuity payments will be made as a life annuity for the
lifetime of the Designated Life. We must receive your request in a
form acceptable to us at our office.
.. In the absence of an election when mandatory annuity payments are to begin,
we will make annual annuity payments as a joint and survivor or single (as
applicable) life fixed annuity with ten payments certain, by applying the
greater of the annuity rates then currently available or the annuity rates
guaranteed in your Annuity. The amount that will be applied to provide such
Annuity payments will be the greater of:
(1)the present value of the future Annual Income Amount payments. Such
present value will be calculated using the greater of the joint and
survivor or single (as applicable) life fixed annuity rates then
currently available or the joint and survivor or single (as
applicable) life fixed annuity rates guaranteed in your Annuity; and
(2)the Account Value.
.. If no Lifetime Withdrawal was ever taken, we will calculate the Annual
Income Amount as if you made your first Lifetime Withdrawal on the date the
annuity payments are to begin.
.. Please note that payments that we make under this benefit after the Annuity
Anniversary coinciding with or next following the older of the owner or
Annuitant's 95/th/ birthday will be treated as annuity payments.
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OTHER IMPORTANT CONSIDERATIONS
.. Withdrawals under the Spousal Highest Daily Lifetime 7 Plus benefit are
subject to all of the terms and conditions of the Annuity.
.. Withdrawals made while the Spousal Highest Daily Lifetime 7 Plus benefit is
in effect will be treated, for tax purposes, in the same way as any other
withdrawals under the Annuity. Any withdrawals made under the benefit will
be taken pro-rata from the Sub-accounts (including the AST Investment Grade
Bond Sub-account) and the DCA Fixed Rate Options (if you are participating
in the 6 or 12 Month DCA Program). Withdrawals from the DCA Fixed Rate
Options will be taken on a last-in, first-out basis.
.. You can make withdrawals from your Annuity while your Account Value is
greater than zero without purchasing the Spousal Highest Daily Lifetime 7
Plus benefit. The Spousal Highest Daily Lifetime 7 Plus benefit provides a
guarantee that if your Account Value is reduced to zero (subject to program
rules regarding the timing and amount of withdrawals), you will be able to
receive your Annual Income Amount in the form of periodic benefit payments.
.. You should carefully consider when to begin taking withdrawals. If you
begin taking withdrawals early, you may maximize the time during which you
may take withdrawals due to longer life expectancy, and you will be using
an optional benefit for which you are paying a charge. On the other hand,
you could limit the value of the benefit if you begin taking withdrawals
too soon. For example, withdrawals reduce your Account Value and may limit
the potential for increasing your Protected Withdrawal Value. You should
discuss with your Financial Professional when it may be appropriate for you
to begin taking withdrawals.
.. Upon inception of the benefit and to maintain the benefit, 100% of your
Account Value must have been allocated to the Permitted Sub-accounts.
.. You cannot allocate Purchase Payments or transfer Account Value to or from
the AST Investment Grade Bond Portfolio Sub-account (as described below) if
you elected this benefit. A summary description of the AST Investment Grade
Bond Portfolio appears in the prospectus section entitled "What Are The
Investment Objectives and Policies of The Portfolios?". You can find a copy
of the AST Investment Grade Bond Portfolio prospectus by going to
www.prudentialannuities.com.
.. You can make withdrawals from your Annuity without purchasing the Spousal
Highest Daily Lifetime 7 Plus benefit. The Spousal Highest Daily Lifetime 7
Plus benefit provides a guarantee that if your Account Value declines due
to Sub-account performance, you will be able to receive your Annual Income
Amount in the form of periodic benefit payments.
.. Transfers to and from the elected Sub-accounts and the AST Investment Grade
Bond Portfolio Sub-account triggered by the Spousal Highest Daily Lifetime
7 Plus pre-determined mathematical formula will not count toward the
maximum number of free transfers allowable under an Annuity.
.. You must allocate your Account Value in accordance with the then available
investment option(s) that we may prescribe in order to maintain the Spousal
Highest Daily Lifetime 7 Plus benefit. If, subsequent to your election of
the benefit, we change our requirements for how Account Value must be
allocated under the benefit, we will not compel you to re-allocate your
Account Value in accordance with our newly adopted requirements. Subject to
any change in requirements, transfers of Account Value and allocation of
additional purchase payments may be subject to new investment limitations.
.. The maximum fee for Spousal Highest Daily Lifetime 7 Plus is 1.50% annually
of the greater of Account Value and the Protected Withdrawal Value. The
current fee for Spousal Highest Daily Lifetime 7 Plus is 0.90% annually of
the greater of Account Value and the Protected Withdrawal Value. We deduct
this fee on each quarterly anniversary of the benefit effective date. Thus,
on each such quarterly anniversary (or the next Valuation Day, if the
quarterly anniversary is not a Valuation Day), we deduct 0.225% of the
greater of the prior day's Account Value, or the prior day's Protected
Withdrawal Value at the end of the quarter. We deduct the fee pro rata from
each of the Sub-accounts including the AST Investment Grade Bond
Sub-account and from the DCA Fund Rate Option (if applicable). Since this
fee is based on the greater of the Account Value and the Protected
Withdrawal Value, the fee for Spousal Highest Daily Lifetime 7 Plus may be
greater than it would have been, had it been based on the Account Value
alone. If the fee to be deducted exceeds the Account Value, we will reduce
the Account Value to zero, and continue the benefit as described above. You
will begin paying the charge for this benefit as of the effective date of
the benefit, even if you do not begin taking withdrawals for many years, or
ever. We will not refund the charges you have paid if you choose never to
take any withdrawals and/or if you never receive any lifetime income
payments.
.. The Basic Death Benefit will terminate if withdrawals taken under Spousal
Highest Daily Lifetime 7 Plus cause your Account Value to reduce to zero.
Certain optional Death Benefits may terminate if withdrawals taken under
Spousal Highest Daily Lifetime 7 Plus cause your Account Value to reduce to
zero. (See "Death Benefit" for more information.)
ELECTION OF AND DESIGNATIONS UNDER THE BENEFIT
We no longer permit new elections of Spousal Highest Daily Lifetime 7 Plus.
Spousal Highest Daily Lifetime 7 Plus could only be elected based on two
Designated Lives. Designated Lives must be natural persons who are each
other's spouses at the time of election of the benefit and at the death of the
first of the Designated Lives to die. Spousal Highest Daily Lifetime 7 Plus
only could be elected where the Owner, Annuitant, and Beneficiary designations
are as follows:
.. One Annuity Owner, where the Annuitant and the Owner are the same person
and the beneficiary is the Owner's spouse. The youngest Owner/Annuitant and
the beneficiary must be at least 50 years old and the oldest must be at
least 55 years old at the time of election; or
.. Co-Annuity Owners, where the Owners are each other's spouses. The
beneficiary designation must be the surviving spouse, or the spouses named
equally. One of the owners must be the Annuitant. The youngest Owner must
be at least 50 years old and the oldest owner must be at least 55 years old
at the time of election; or
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.. One Annuity Owner, where the Owner is a custodial account established to
hold retirement assets for the benefit of the Annuitant pursuant to the
provisions of Section 408(a) of the Internal Revenue Code (or any successor
Code section thereto) ("Custodial Account"), the beneficiary is the
Custodial Account, and the spouse of the Annuitant is the Contingent
Annuitant. The youngest of the Annuitant and the Contingent Annuitant must
be at least 50 years old and the oldest must be at least 55 years old at
the time of election.
We do not permit a change of Owner under this benefit, except as follows: (a)
if one Owner dies and the surviving spousal Owner assumes the Annuity, or (b)
if the Annuity initially is co-owned, but thereafter the Owner who is not the
Annuitant is removed as Owner. We permit changes of beneficiary under this
benefit. If the Designated Lives divorce, the Spousal Highest Daily Lifetime 7
Plus benefit may not be divided as part of the divorce settlement or judgment.
Nor may the divorcing spouse who retains ownership of the Annuity appoint a
new Designated Life upon re-marriage.
Spousal Highest Daily Lifetime 7 Plus could have been elected at the time that
you purchased your Annuity or after the Issue Date, subject to our eligibility
rules and restrictions. See "Termination of Existing Benefits and Election of
New Benefits" information pertaining to elections, termination and re-election
of benefits. PLEASE NOTE THAT IF YOU TERMINATE A LIVING BENEFIT AND ELECT A
NEW LIVING BENEFIT, YOU LOSE THE GUARANTEES THAT YOU HAD ACCUMULATED UNDER
YOUR EXISTING BENEFIT AND WE WILL BASE ANY GUARANTEES UNDER THE NEW BENEFIT ON
YOUR ACCOUNT VALUE AS OF THE DATE THE NEW BENEFIT BECOMES ACTIVE. WE RESERVE
THE RIGHT TO WAIVE, CHANGE AND/OR FURTHER LIMIT THE ELECTION FREQUENCY IN THE
FUTURE.
TERMINATION OF THE BENEFIT
You may terminate the benefit at any time by notifying us. If you terminate
the benefit, any guarantee provided by the benefit will terminate as of the
date the termination is effective, and certain restrictions on re-election may
apply. The benefit automatically terminates: (i) if upon the death of the
first Designated Life, the surviving Designated Life opts to take the death
benefit under the Annuity (thus, the benefit does not terminate solely because
of the death of the first Designated Life), (ii) upon the death of the second
Designated Life, (iii) upon your termination of the benefit, (iv) upon your
surrender of the Annuity, (v) upon your election to begin receiving annuity
payments (although if you have elected to take annuity payments in the form of
the Annual Income Amount, we will continue to pay the Annual Income Amount),
(vi) if both the Account Value and Annual Income Amount equal zero, or
(vii) if you cease to meet our requirements as described in "Election of and
Designations under the Benefit".
Upon termination of Spousal Highest Daily Lifetime 7 Plus other than upon
death of a Designated Life, we impose any accrued fee for the benefit (i.e.,
the fee for the pro-rated portion of the year since the fee was last
assessed), and thereafter we cease deducting the charge for the benefit. With
regard to your investment allocations, upon termination we will: (i) leave
intact amounts that are held in the variable investment options, and
(ii) transfer all amounts held in the AST Investment Grade Bond Portfolio
Sub-account (as defined below) to your variable investment options based on
your existing allocation instructions or (in the absence of such instruction)
pro rata (i.e. in the same proportion as the current balances in your variable
investment options).
HOW SPOUSAL HIGHEST DAILY LIFETIME 7 PLUS TRANSFERS ACCOUNT VALUE BETWEEN YOUR
PERMITTED SUB-ACCOUNTS AND THE AST INVESTMENT GRADE BOND SUB-ACCOUNT
See "How Highest Daily Lifetime 7 Plus Transfers Account Value Between Your
Permitted Sub-accounts and the AST Investment Grade Bond Sub-account" in this
Prospectus for information regarding this component of the benefit.
ADDITIONAL TAX CONSIDERATIONS
If you purchase an annuity as an investment vehicle for "qualified"
investments, including an IRA, SEP-IRA, Tax Sheltered Annuity (or 403(b)) or
employer plan under Code Section 401(a), the required minimum distribution
rules under the Code provide that you begin receiving periodic amounts from
your annuity beginning after age 70 1/2. For a Tax Sheltered Annuity or a
401(a) plan for which the participant is not a greater than five (5) percent
owner of the employer, this required beginning date can generally be deferred
to retirement, if later. Roth IRAs are not subject to these rules during the
owner's lifetime. The amount required under the Code may exceed the Annual
Income Amount, which will cause us to increase the Annual Income Amount in any
Annuity Year that required minimum distributions due from your Annuity are
greater than such amounts. In addition, the amount and duration of payments
under the annuity payment and death benefit provisions may be adjusted so that
the payments do not trigger any penalty or excise taxes due to tax
considerations such as required minimum distribution provisions under the tax
law. Please note, however, that any withdrawal (except the Non-Lifetime
Withdrawal) you take prior to the Tenth Anniversary, even if withdrawn to
satisfy required minimum distribution rules, will cause you to lose the
ability to receive the Return of Principal Guarantee and the guaranteed amount
described above under "Key Feature - Protected Withdrawal Value".
As indicated, withdrawals made while this benefit is in effect will be
treated, for tax purposes, in the same way as any other withdrawals under the
Annuity. Please see the Tax Considerations section of the prospectus for a
detailed discussion of the tax treatment of withdrawals. We do not address
each potential tax scenario that could arise with respect to this benefit
here. However, we do note that if you participate in Spousal Highest Daily
Lifetime 7 Plus through a non-qualified annuity, as with all withdrawals, once
all Purchase Payments are returned under the Annuity, all subsequent
withdrawal amounts will be taxed as ordinary income.
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SPOUSAL HIGHEST DAILY LIFETIME 7 PLUS WITH BENEFICIARY INCOME OPTION/SM/
We previously offered an optional death benefit feature under Spousal Highest
Daily Lifetime 7 Plus, the amount of which is linked to your Annual Income
Amount . We refer to this optional death benefit as the Beneficiary Income
Option or BIO. You could choose Spousal Highest Daily Lifetime 7 Plus with or
without also selecting the Beneficiary Income Option death benefit. However,
you could not elect the Beneficiary Income Option without Spousal Highest
Daily Lifetime 7 Plus and you could elect the Beneficiary Income Option death
benefit at the time you elect Spousal Highest Daily Lifetime 7 Plus. Please
note that if you terminate Spousal Highest Daily Lifetime 7 Plus with BIO and
elect any available living benefit you lose the guarantees that you had
accumulated under your existing benefit and we will base any guarantees under
the new benefit on your Account Value as of the date the new benefit becomes
active. As long as your Spousal Highest Daily Lifetime 7 Plus with Beneficiary
Income Option is in effect, you must allocate your Account Value in accordance
with the then permitted and available investment option(s) with this benefit.
If you elected the Beneficiary Income Option death benefit, you could not
elect any other optional benefit. You could elect the Beneficiary Income
Option death benefit so long as each Designated Life is no older than age 75
at the time of election and the Spousal Highest Daily Lifetime 7 Plus age
requirements are met. This death benefit is not transferable in the event of a
divorce, nor may the benefit be split in accordance with any divorce
proceedings or similar instrument of separation. If you choose the Spousal
Highest Daily Lifetime 7 Plus with BIO, the maximum charge is 2.00% of the
greater of Account Value and the Protected Withdrawal Value ("PWV") annually.
The current charge is 1.10% annually of the greater of Account Value and the
PWV. We deduct this charge on each quarterly anniversary of the benefit
effective date. Thus, on each such quarterly anniversary (or the next
Valuation Day, if the quarterly anniversary is not a Valuation Day), we deduct
0.275% of the greater of the prior day's Account Value or the prior day's
Protected Withdrawal Value at the end of the quarter. We deduct the fee pro
rata from each of the Sub-accounts, including the AST Investment Grade Bond
Sub-account and from the DCA Fixed Rate Option (if applicable). Because the
fee for this benefit is based on the greater of the Account Value or the
Protected Withdrawal Value, the fee for Spousal Highest Daily Lifetime 7 Plus
with the Beneficiary Income Option may be greater than it would have been
based on the Account Value alone. If the fee to be deducted exceeds the
current Account Value, we will reduce the Account Value to zero, and continue
the benefit as described below.
For purposes of this optional death benefit, we calculate the Annual Income
Amount and Protected Withdrawal Value in the same manner that we do under
Spousal Highest Daily Lifetime 7 Plus itself. However, we will stop
determining the Periodic Value (as described above) on the earlier of your
first Lifetime Withdrawal after the effective date of the benefit or the Tenth
Anniversary Date. This means that under the Spousal Highest Daily Lifetime 7
Plus with BIO benefit you will not be eligible for the guaranteed minimum
Periodic Values described above on the 20/th/ and 25/th/ Anniversary of the
Benefit Effective Date. Upon the first death of a Designated Life, no amount
is payable under the Beneficiary Income Option death benefit. Upon the second
death of a Designated Life, we identify the following amounts: (a) the amount
of the basic death benefit under the Annuity, (b) the Protected Withdrawal
Value, and (c) the Annual Income Amount. If there were no Lifetime Withdrawals
prior to the date of death of the second Designated Life, then we calculate
the Protected Withdrawal Value for purposes of this death benefit as of the
date of death of the second Designated Life, and we calculate the Annual
Income Amount as if there were a Lifetime Withdrawal on the date of death of
the second Designated Life. If there were Lifetime Withdrawals prior to the
date of death of the second Designated Life, then we set the Protected
Withdrawal Value and Annual Income Amount for purposes of this death benefit
as of the date that we receive due proof of death.
If there is one beneficiary, he/she must choose to receive either the basic
death benefit (in a lump sum or other permitted form of distribution) or the
Beneficiary Income Option death benefit (in the form of annual payments of the
Annual Income Amount - such payments may be annual or at other intervals that
we permit). If there are multiple beneficiaries, each beneficiary is presented
with the same choice. Thus, each beneficiary can choose to take his/her
portion of either (a) the basic Death Benefit, or (b) the Beneficiary Income
Option death benefit. In order to receive the Beneficiary Income Option Death
Benefit, each beneficiary's share of the death benefit proceeds must be
allocated as a percentage of the total death benefit to be paid. We allow a
beneficiary who has opted to receive the Annual Income Amount to designate
another beneficiary, who would receive any remaining payments upon the former
beneficiary's death. Note also that the final payment, exhausting the
Protected Withdrawal Value, may be less than the Annual Income Amount.
Here is an example to illustrate how the death benefit may be paid:
.. Assume that (i) the basic death benefit is $50,000, the Protected
Withdrawal Value is $100,000, and the Annual Income Amount is $5,000;
(ii) there are two beneficiaries (the first designated to receive 75% of
the death benefit and the second designated to receive 25% of the death
benefit); (iii) the first beneficiary chooses to receive his/her portion of
the death benefit in the form of the Annual Income Amount, and the second
beneficiary chooses to receive his/her portion of the death benefit with
reference to the basic death benefit.
.. Under those assumptions, the first beneficiary will be paid a pro-rated
portion of the Annual Income Amount for 20 years (the 20 year pay out
period is derived from the $5,000 Annual Income Amount, paid each year
until it exhausts the entire $100,000 Protected Withdrawal Value). The
pro-rated portion of the Annual Income Amount equal to $3,750 (i.e., the
first beneficiary's 75% share multiplied by $5,000) is then paid each year
for the 20 year period. Payment of $3,750 for 20 years results in total
payments of $75,000 (i.e., the first beneficiary's 75% share of the
$100,000 Protected Withdrawal Value). The second beneficiary would receive
25% of the basic death benefit amount (or $12,500).
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If you elect to terminate Spousal Highest Daily Lifetime 7 Plus with
Beneficiary Income Option, both Spousal Highest Daily Lifetime 7 Plus and that
death benefit option will be terminated. You may not terminate the death
benefit option without terminating the entire benefit. If you terminate
Spousal Highest Daily Lifetime 7 Plus with Beneficiary Income Option, your
ability to elect other optional living benefits will be affected as indicated
in the "Election of and Designations under the Benefit" section.
HIGHEST DAILY LIFETIME 6 PLUS INCOME BENEFIT (HD 6 PLUS)
We offer a benefit that guarantees until the death of the single designated
life (the Annuitant) the ability to withdraw an annual amount (the "Annual
Income Amount") equal to a percentage of an initial value (the "Protected
Withdrawal Value") regardless of the impact of Sub-account performance on the
Account Value, subject to our rules regarding the timing and amount of
withdrawals. You are guaranteed to be able to withdraw the Annual Income
Amount for the rest of your life ("Lifetime Withdrawals"), provided that you
have not made withdrawals of excess income that have resulted in your Account
Value being reduced to zero. We also permit you to make a one-time
Non-Lifetime Withdrawal from your Annuity prior to taking Lifetime Withdrawals
under the benefit. Highest Daily Lifetime 6 Plus may be appropriate if you
intend to make periodic withdrawals from your Annuity, and wish to ensure that
Sub-account performance will not affect your ability to receive annual
payments. You are not required to take withdrawals as part of the benefit -
the guarantees are not lost if you withdraw less than the maximum allowable
amount each year under the rules of the benefit. An integral component of
Highest Daily Lifetime 6 Plus is the mathematical formula we employ that may
periodically transfer your Account Value to and from the AST Investment Grade
Bond Sub-account. See the section below entitled "How Highest Daily Lifetime 6
Plus Transfers Account Value Between Your Permitted Sub-accounts and the AST
Investment Grade Bond Sub-account." Withdrawals are taken first from your own
Account Value. We are only required to begin making lifetime income payments
to you under our guarantee when and if your Account Value is reduced to zero
(unless the benefit has terminated).
The income benefit under Highest Daily Lifetime 6 Plus currently is based on a
single "designated life" who is at least 45 years old on the date that the
benefit is acquired. The Highest Daily Lifetime 6 Plus Benefit is not
available if you elect any other optional living benefit or the Plus 40 life
insurance rider or the Highest Daily Value death benefit. As long as your
Highest Daily Lifetime 6 Plus Benefit is in effect, you must allocate your
Account Value in accordance with the permitted Sub-accounts and other
investment option(s) available with this benefit. For a more detailed
description of the permitted investment options, see the "Investment Options"
section.
Highest Daily Lifetime 6 Plus also provides for a Death Benefit generally
equal to three times your Annual Income Amount. The Death Benefit is not
payable if your Account Value is reduced to zero as a result of withdrawals or
if annuity payments are being made at the time of the decedent's death. See
Death Benefit Component of Highest Daily Lifetime 6 Plus, below.
ALTHOUGH YOU ARE GUARANTEED THE ABILITY TO WITHDRAW YOUR ANNUAL INCOME AMOUNT
FOR LIFE EVEN IF YOUR ACCOUNT VALUE FALLS TO ZERO, IF YOU TAKE WITHDRAWALS OF
EXCESS INCOME THAT BRING YOUR ACCOUNT VALUE TO ZERO, YOUR ANNUAL INCOME AMOUNT
WOULD ALSO FALL TO ZERO, AND THE BENEFIT WOULD TERMINATE. IN THAT SCENARIO, NO
FURTHER AMOUNT, INCLUDING THE DEATH BENEFIT DESCRIBED BELOW, WOULD BE PAYABLE
UNDER THE HIGHEST DAILY LIFETIME 6 PLUS BENEFIT.
You may also participate in the 6 or 12 Month Dollar Cost Averaging Program if
you elect Highest Daily Lifetime 6 Plus for Annuities issued on or after
May 1, 2009, subject to the 6 or 12 Month DCA Program's rules, and subject to
State approvals. The 6 or 12 Month DCA Program is not available in certain
states.
Currently, if you elect Highest Daily Lifetime 6 Plus and subsequently
terminate the benefit, you may elect another living benefit, subject to our
current rules. See "Election of and Designations under the Benefit" below and
"Termination of Existing Benefits and Election of New Benefits" for details.
Please note that if you terminate Highest Daily Lifetime 6 Plus and elect
another living benefit, you lose the guarantees that you had accumulated under
your existing benefit and we will base any guarantees under the new benefit on
your Account Value as of the date the new benefit becomes active.
KEY FEATURE - PROTECTED WITHDRAWAL VALUE
The Protected Withdrawal Value is used to calculate the initial Annual Income
Amount. The Protected Withdrawal Value is separate from your Account Value and
not available as cash or a lump sum. On the effective date of the benefit, the
Protected Withdrawal Value is equal to your Account Value. On each Valuation
Day thereafter, until the date of your first Lifetime Withdrawal (excluding
any Non-Lifetime Withdrawal discussed below), the Protected Withdrawal Value
is equal to the "Periodic Value" described in the next paragraphs.
The "Periodic Value" initially is equal to the Account Value on the effective
date of the benefit. On each Valuation Day thereafter until the first Lifetime
Withdrawal, we recalculate the Periodic Value. We stop determining the
Periodic Value upon your first Lifetime Withdrawal after the effective date of
the benefit. On each Valuation Day (the "Current Valuation Day"), the Periodic
Value is equal to the greater of:
(1)the Periodic Value for the immediately preceding business day (the "Prior
Valuation Day") appreciated at the daily equivalent of 6% annually during
the calendar day(s) between the Prior Valuation Day and the Current
Valuation Day (i.e., one day for successive Valuation Days, but more than
one calendar day for Valuation Days that are separated by weekends and/or
holidays), plus the amount of any purchase payment made on the Current
Valuation Day (the Periodic Value is proportionally reduced for any
Non-Lifetime Withdrawal); and
(2)the Account Value on the current Valuation Day.
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If you have not made a Lifetime Withdrawal on or before the 10th or 20th
Anniversary of the effective date of the benefit, your Periodic Value on the
10th or 20th Anniversary of the benefit effective date is equal to the greater
of:
(1)the Periodic Value described above or,
(2)the sum of (a), (b) and (c) below (proportionally reduced for any
Non-Lifetime Withdrawals):
(a)200% (on the 10th anniversary) or 400% (on the 20th anniversary) of the
Account Value on the effective date of the benefit including any
purchase payments made on that day;
(b)200% (on the 10th anniversary) or 400% (on the 20th anniversary) of all
purchase payments made within one year following the effective date of
the benefit; and
(c)all purchase payments made after one year following the effective date
of the benefit.
Once the first Lifetime Withdrawal is made, the Protected Withdrawal Value at
any time is equal to the greater of (i) the Protected Withdrawal Value on the
date of the first Lifetime Withdrawal, increased for subsequent purchase
payments and reduced for subsequent Lifetime Withdrawals, and (ii) the highest
daily Account Value upon any step-up, increased for subsequent purchase
payments and reduced for subsequent Lifetime Withdrawals (see below).
KEY FEATURE - ANNUAL INCOME AMOUNT UNDER THE HIGHEST DAILY LIFETIME 6 PLUS
BENEFIT
The Annual Income Amount is equal to a specified percentage of the Protected
Withdrawal Value at the first Lifetime Withdrawal and does not reduce in
subsequent Annuity Years, as described below. The percentage initially depends
on the age of the Annuitant on the date of the first Lifetime Withdrawal after
election of the benefit. The percentages are: 4% for ages 45 - less than
59 1/2; 5% for ages 59 1/2-79, and 6% for ages 80 or older. Under the Highest
Daily Lifetime 6 Plus benefit, if your cumulative Lifetime Withdrawals in an
Annuity Year are less than or equal to the Annual Income Amount, they will not
reduce your Annual Income Amount in subsequent Annuity Years, but any such
withdrawals will reduce the Annual Income Amount on a dollar-for-dollar basis
in that Annuity Year. If your cumulative Lifetime Withdrawals in an Annuity
Year are in excess of the Annual Income Amount ("Excess Income"), your Annual
Income Amount in subsequent years will be reduced (except with regard to
required minimum distributions for this Annuity that comply with our rules) by
the result of the ratio of the Excess Income to the Account Value immediately
prior to such withdrawal (see examples of this calculation below). If you take
withdrawals of Excess Income, only the portion of the Lifetime Withdrawal that
exceeds the remaining Annual Income Amount will proportionally reduce your
Protected Withdrawal Value and Annual Income Amount in future years.
Reductions are based on the actual amount of the withdrawal that may apply.
Lifetime Withdrawals of any amount up to and including the Annual Income
Amount will reduce the Protected Withdrawal Value by the amount of the
withdrawal. Withdrawals of Excess Income will reduce the Protected Withdrawal
Value by the same ratio as the reduction to the Annual Income Amount.
You may use the Systematic Withdrawal program to make withdrawals of the
Annual Income Amount. Any systematic withdrawal will be deemed a Lifetime
Withdrawal under this benefit.
Any purchase payment that you make subsequent to the election of Highest Daily
Lifetime 6 Plus and subsequent to the first Lifetime Withdrawal will
(i) increase the then-existing Annual Income Amount by an amount equal to a
percentage of the purchase payment based on the age of the Annuitant at the
time of the first Lifetime Withdrawal (the percentages are: 4% for ages 45 -
less than 59 1/2; 5% for ages 59 1/2-79 and 6% for ages 80 and older) and
(ii) increase the Protected Withdrawal Value by the amount of the Purchase
Payment.
If your Annuity permits additional purchase payments, we may limit any
additional purchase payment(s) if we determine that as a result of the timing
and amounts of your additional purchase payments and withdrawals, the Annual
Income Amount is being increased in an unintended fashion. Among the factors
we will use in making a determination as to whether an action is designed to
increase the Annual Income Amount in an unintended fashion is the relative
size of additional purchase payment(s). Subject to state law, we reserve the
right to not accept additional purchase payments if we are not then offering
this benefit for new elections. We will exercise such reservation of right for
all annuity purchasers in the same class in a nondiscriminatory manner.
HIGHEST DAILY AUTO STEP-UP
An automatic step-up feature ("Highest Daily Auto Step-Up") is part of Highest
Daily Lifetime 6 Plus. As detailed in this paragraph, the Highest Daily Auto
Step-Up feature can result in a larger Annual Income Amount subsequent to your
first Lifetime Withdrawal. The Highest Daily Auto Step-Up starts with the
anniversary of the Issue Date of the Annuity (the "Annuity Anniversary")
immediately after your first Lifetime Withdrawal under the benefit.
Specifically, upon the first such Annuity Anniversary, we identify the Account
Value on each Valuation Day within the immediately preceding Annuity Year
after your first Lifetime Withdrawal. Having identified the highest daily
value (after all daily values have been adjusted for subsequent purchase
payments and withdrawals), we then multiply that value by a percentage that
varies based on the age of the Annuitant on the Annuity Anniversary as of
which the step-up would occur. The percentages are: 4% for ages 45 - less than
59 1/2; 5% for ages 59 1/2-79, and 6% for ages 80 and older. If that value
exceeds the existing Annual Income Amount, we replace the existing amount with
the new, higher amount. Otherwise, we leave the existing Annual Income Amount
intact. The Account Value on the Annuity Anniversary is considered the last
daily step-up value of the Annuity Year. All daily valuations and annual
step-ups will only occur on a Valuation Day. In later years (i.e., after the
first Annuity Anniversary after the first Lifetime Withdrawal), we determine
165
whether an automatic step-up should occur on each Annuity Anniversary, by
performing a similar examination of the Account Values that occurred on
Valuation Days during the year. Taking Lifetime Withdrawals could produce a
greater difference between your Protected Withdrawal Value and your Account
Value, which may make a Highest Daily Auto Step-up less likely to occur. At
the time that we increase your Annual Income Amount, we also increase your
Protected Withdrawal Value to equal the highest daily value upon which your
step-up was based only if that results in an increase to the Protected
Withdrawal Value. Your Protected Withdrawal Value will never be decreased as a
result of an income step-up. If, on the date that we implement a Highest Daily
Auto Step-Up to your Annual Income Amount, the charge for Highest Daily
Lifetime 6 Plus has changed for new purchasers, you may be subject to the new
charge at the time of such step-up. Prior to increasing your charge for
Highest Daily Lifetime 6 Plus upon a step-up, we would notify you, and give
you the opportunity to cancel the automatic step-up feature. If you receive
notice of a proposed step-up and accompanying fee increase, you should
carefully evaluate whether the amount of the step-up justifies the increased
fee to which you will be subject.
If you are engaged in a Systematic Withdrawal program, we will not
automatically increase the withdrawal amount when there is an increase to the
Annual Income Amount.
The Highest Daily Lifetime 6 Plus benefit does not affect your ability to take
withdrawals under your Annuity, or limit your ability to take withdrawals that
exceed the Annual Income Amount. Under Highest Daily Lifetime 6 Plus, if your
cumulative Lifetime Withdrawals in an Annuity Year are less than or equal to
the Annual Income Amount, they will not reduce your Annual Income Amount in
subsequent Annuity Years, but any such withdrawals will reduce the Annual
Income Amount on a dollar-for-dollar basis in that Annuity Year. If,
cumulatively, you withdraw an amount less than the Annual Income Amount in any
Annuity Year, you cannot carry over the unused portion of the Annual Income
Amount to subsequent Annuity Years.
Because each of the Protected Withdrawal Value and Annual Income Amount is
determined in a way that is not solely related to Account Value, it is
possible for the Account Value to fall to zero, even though the Annual Income
Amount remains.
Examples of dollar-for-dollar and proportional reductions, and the Highest
Daily Auto Step-Up are set forth below. The values shown here are purely
hypothetical, and do not reflect the charges for the Highest Daily Lifetime 6
Plus benefit or any other fees and charges under the Annuity. Assume the
following for all three examples:
.. The Issue Date is December 1, 2008
.. The Highest Daily Lifetime 6 Plus benefit is elected on September 1, 2009
.. The Annuitant was 70 years old when he/she elected the Highest Daily
Lifetime 6 Plus benefit.
EXAMPLE OF DOLLAR-FOR-DOLLAR REDUCTIONS
On November 24, 2009, the Protected Withdrawal Value is $120,000, resulting in
an Annual Income Amount of $6,000 (since the designated life is between the
ages of 59 1/2 and 79 at the time of the first Lifetime Withdrawal, the Annual
Income Amount is 5% of the Protected Withdrawal Value, in this case 5% of
$120,000). Assuming $2,500 is withdrawn from the Annuity on this date, the
remaining Annual Income Amount for that Annuity Year (up to and including
December 1, 2009) is $3,500. This is the result of a dollar-for-dollar
reduction of the Annual Income Amount ($6,000 less $2,500 = $3,500).
EXAMPLE OF PROPORTIONAL REDUCTIONS
Continuing the previous example, assume an additional withdrawal of $5,000
occurs on November 27, 2009 and the Account Value at the time and immediately
prior to this withdrawal is $118,000. The first $3,500 of this withdrawal
reduces the Annual Income Amount for that Annuity Year to $0. The remaining
withdrawal amount of $1,500 - reduces the Annual Income Amount in future
Annuity Years on a proportional basis based on the ratio of the excess
withdrawal to the Account Value immediately prior to the excess withdrawal.
(Note that if there are other future withdrawals in that Annuity Year, each
would result in another proportional reduction to the Annual Income Amount).
HERE IS THE CALCULATION:
Account Value before Lifetime Withdrawal $118,000.00
Less amount of "non" excess withdrawal $ 3,500.00
Account Value immediately before excess withdrawal of $1,500 $114,500.00
Excess withdrawal amount $ 1,500.00
Divided by Account Value immediately before excess withdrawal $114,500.00
Ratio 1.31%
Annual Income Amount $ 6,000.00
Less ratio of 1.31% $ 78.60
Annual Income Amount for future Annuity Years $ 5,921.40
EXAMPLE OF HIGHEST DAILY AUTO STEP-UP
On each Annuity Anniversary date, the Annual Income Amount is stepped-up if
the appropriate percentage (based on the Annuitant's age on the Annuity
Anniversary) of the highest daily value since your first Lifetime Withdrawal
(or last Annuity
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Anniversary in subsequent years), adjusted for withdrawals and additional
purchase payments, is higher than the Annual Income Amount, adjusted for
excess withdrawals and additional purchase payments.
Continuing the same example as above, the Annual Income Amount for this
Annuity Year is $6,000. However, the excess withdrawal on November 27 reduces
the amount to $5,921.40 for future years (see above). For the next Annuity
Year, the Annual Income Amount will be stepped up if 5% (since the designated
life is between 59 1/2 and 79 on the date of the potential step-up) of the
highest daily Account Value adjusted for withdrawals and purchase payments is
higher than $5,921.40. Here are the calculations for determining the daily
values. Only the November 25 value is being adjusted for excess withdrawals as
the November 30 and December 1 Valuation Days occur after the excess
withdrawal on November 27.
HIGHEST DAILY VALUE
(ADJUSTED WITH ADJUSTED ANNUAL
WITHDRAWAL AND PURCHASE INCOME AMOUNT (5% OF THE
DATE* ACCOUNT VALUE PAYMENTS)** HIGHEST DAILY VALUE)
----- ------------- ----------------------- ------------------------
November 25, 2009 $119,000.00 $119,000.00 $5,950.00
November 26, 2009 Thanksgiving Day
November 27, 2009 $113,000.00 $113,986.95 $5,699.35
November 30, 2009 $113,000.00 $113,986.95 $5,699.35
December 01, 2009 $119,000.00 $119,000.00 $5,950.00
* In this example, the Annuity Anniversary date is December 1. The Valuation
Dates are every day following the first Lifetime Withdrawal. In subsequent
Annuity Years Valuation Dates will be every day following the Annuity
Anniversary. The Annuity Anniversary Date of December 1 is considered the
final Valuation Date for the Annuity Year.
** In this example, the first daily value after the first Lifetime Withdrawal
is $119,000 on November 25, resulting in an adjusted Annual Income Amount
of $5,950.00. This amount is adjusted on November 27 to reflect the $5,000
withdrawal. The calculations for the adjustments are:
. The Account Value of $119,000 on November 25 is first reduced
dollar-for-dollar by $3,500 ($3,500 is the remaining Annual Income
Amount for the Annuity Year), resulting in an adjusted Account Value of
$115,500 before the excess withdrawal.
. This amount ($115,500) is further reduced by 1.31% (this is the ratio in
the above example which is the excess withdrawal divided by the Account
Value immediately preceding the excess withdrawal) resulting in a
Highest Daily Value of $113,986.95.
. The adjusted Annual Income Amount is carried forward to the next
Valuation Date of November 30. At this time, we compare this amount to
5% of the Account Value on November 30. Since the November 27 adjusted
Annual Income Amount of $5,699.35 is higher than $5,650.00 (5% of
$113,000), we continue to carry $5,699.35 forward to the next and final
Valuation Date of December 1. The Account Value on December 1 is
$119,000 and 5% of this amount is $5,950. Since this is higher than
$5,699.35, the adjusted Annual Income Amount is reset to $5,950.00.
In this example, 5% of the December 1 value results in the highest amount of
$5,950.00. Since this amount is higher than the current year's Annual Income
Amount of $5,921.40 adjusted for excess withdrawals, the Annual Income Amount
for the next Annuity Year, starting on December 2, 2009 and continuing through
December 1, 2010, will be stepped-up to $5,950.00.
NON-LIFETIME WITHDRAWAL FEATURE
You may take a one-time non-lifetime withdrawal ("Non-Lifetime Withdrawal")
under Highest Daily Lifetime 6 Plus. It is an optional feature of the benefit
that you can only elect at the time of your first withdrawal. You cannot take
a Non-Lifetime Withdrawal in an amount that would cause your Annuity's Account
Value, after taking the withdrawal, to fall below the minimum Surrender Value
(see "Access to Account Value - Can I Surrender My Annuity for Its Value?").
This Non-Lifetime Withdrawal will not establish your initial Annual Income
Amount and the Periodic Value described above will continue to be calculated.
However, the total amount of the withdrawal will proportionally reduce all
guarantees associated with the Highest Daily Lifetime 6 Plus benefit. You must
tell us if your withdrawal is intended to be the Non-Lifetime Withdrawal and
not the first Lifetime Withdrawal under the Highest Daily Lifetime 6 Plus
benefit. If you don't elect the Non-Lifetime Withdrawal, the first withdrawal
you make will be the first Lifetime Withdrawal that establishes your Protected
Withdrawal Value and Annual Income Amount. Once you elect to take the
Non-Lifetime Withdrawal or Lifetime Withdrawals, no additional Non-Lifetime
Withdrawals may be taken.
The Non-Lifetime Withdrawal will proportionally reduce: the Protected
Withdrawal Value; the Periodic Value guarantees on the tenth and twentieth
anniversaries of the benefit effective date (described above); and the Death
Benefit (described below). It will reduce all three by the percentage the
total withdrawal amount (including any applicable CDSC) represents of the then
current Account Value immediately prior to the withdrawal.
If you are participating in a Systematic Withdrawal program, the first
withdrawal under the program cannot be classified as the Non-Lifetime
Withdrawal. The first partial withdrawal in payment of any third party
investment advisory service from your Annuity also cannot be classified as the
Non-Lifetime Withdrawal.
EXAMPLE - NON-LIFETIME WITHDRAWAL (PROPORTIONAL REDUCTION)
This example is purely hypothetical and does not reflect the charges for the
benefit or any other fees and charges under the Annuity. It is intended to
illustrate the proportional reduction of the Non-Lifetime Withdrawal under
this benefit.
Assume the following:
. The Issue Date is December 1, 2008
. The Highest Daily Lifetime 6 Plus benefit is elected on September 1, 2009
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. The Account Value at benefit election was $105,000
. The Annuitant was 70 years old when he/she elected the Highest Daily
Lifetime 6 Plus benefit
. No previous withdrawals have been taken under the Highest Daily Lifetime
6 Plus benefit
On October 2, 2009, the Protected Withdrawal Value is $125,000, the 10th
benefit year minimum Periodic Value guarantee is $210,000, and the 20th
benefit year minimum Periodic Value guarantee is $420,000, and the Account
Value is $120,000. Assuming $15,000 is withdrawn from the Annuity on
October 2, 2009 and is designated as a Non-Lifetime Withdrawal, all guarantees
associated with the Highest Daily Lifetime 6 Plus benefit will be reduced by
the ratio the total withdrawal amount represents of the Account Value just
prior to the withdrawal being taken.
HERE IS THE CALCULATION:
Withdrawal amount divided by $ 15,000
Account Value before withdrawal $120,000
Equals ratio 12.5%
All guarantees will be reduced by the above ratio (12.5%)
Protected Withdrawal Value $109,375
10/th/ benefit year Minimum Periodic Value $183,750
20/th/ benefit year Minimum Periodic Value $367,500
REQUIRED MINIMUM DISTRIBUTIONS
Withdrawals that exceed the Annual Income Amount, but which you are required
to take as a required minimum distribution for this Annuity, will not reduce
the Annual Income Amount for future years. No additional Annual Income Amounts
will be available in an Annuity Year due to required minimum distributions
unless the required minimum distribution amount is greater than the Annual
Income Amount. Unless designated as a Non-Lifetime Withdrawal, required
minimum distributions are considered Lifetime Withdrawals. If you take a
withdrawal in an Annuity Year in which your required minimum distribution for
that year is not greater than the Annual Income Amount, and the amount of the
withdrawal exceeds the Annual Income Amount for that year, we will treat the
withdrawal as a withdrawal of Excess Income. Such a withdrawal of Excess
Income will reduce the Annual Income Amount available in future years. If the
required minimum distribution (as calculated by us for your Annuity and not
previously withdrawn in the current calendar year) is greater than the Annual
Income Amount, an amount equal to the remaining Annual Income Amount plus the
difference between the required minimum distribution amount not previously
withdrawn in the current calendar year and the Annual Income Amount will be
available in the current Annuity Year without it being considered a withdrawal
of Excess Income. In the event that a required minimum distribution is
calculated in a calendar year that crosses more than one Annuity Year and you
choose to satisfy the entire required minimum distribution for that calendar
year in the next Annuity Year, the distribution taken in the next Annuity Year
will reduce your Annual Income Amount in that Annuity Year on a dollar by
dollar basis. If the required minimum distribution not taken in the prior
Annuity Year is greater than the Annual Income Amount as guaranteed by the
benefit in the current Annuity Year, the total required minimum distribution
amount may be taken without being treated as a withdrawal of Excess Income.
In any year in which the requirement to take required minimum distributions is
suspended by law, we reserve the right, in our sole discretion and regardless
of any position taken on this issue in a prior year, to treat any amount that
would have been considered as a required minimum distribution if not for the
suspension as eligible for treatment as described herein.
EXAMPLE - REQUIRED MINIMUM DISTRIBUTIONS
The following example is purely hypothetical and is intended to illustrate a
scenario in which the required minimum distribution amount in a given Annuity
Year is greater than the Annual Income Amount.
Annual Income Amount = $5,000
Remaining Annual Income Amount = $3,000
Required Minimum Distribution = $6,000
The amount you may withdraw in the current Annuity Year without it being
treated as an Excess Withdrawal is $4,000: ($3,000 + ($6,000 - $5,000) =
$4,000).
If the $4,000 withdrawal is taken, the remaining Annual Income Amount will be
zero and the remaining required minimum distribution amount of $2,000 may be
taken in the subsequent Annuity Year (when your Annual Income Amount is reset
to $5,000) without proportionally reducing all of the guarantees associated
with the Highest Daily Lifetime 6 Plus benefit as described above. The amount
you may withdraw in the subsequent Annuity Year if you stop taking withdrawals
in the current Annuity Year and choose not to satisfy the required minimum
distribution in the current Annuity Year (assuming the Annual Income Amount in
the
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subsequent Annuity Year is $5,000), without being treated as a withdrawal of
Excess Income is $6,000. This withdrawal must comply with all IRS guidelines
in order to satisfy the required minimum distribution for the current calendar
year.
DEATH BENEFIT COMPONENT OF HIGHEST DAILY LIFETIME 6 PLUS
If you elect Highest Daily Lifetime 6 Plus, we include a death benefit (Death
Benefit), at no additional cost that is linked to the Annual Income Amount
under the benefit. If a death benefit is triggered and you currently own
Highest Daily Lifetime 6 Plus, then your Death Benefit will be equal to the
greatest of:
.. the basic death benefit under the Annuity; and
.. the amount of any optional death benefit you may have elected and remains
in effect; and
.. (a) if no Lifetime Withdrawal had been taken prior to death, 300% of the
Annual Income Amount that would have been determined on the date of death
if a Lifetime Withdrawal had occurred on that date, or (b) if a Lifetime
Withdrawal had been taken prior to death, 300% of the Annual Income Amount
as of our receipt of due proof of death.
PLEASE NOTE THAT THE DEATH BENEFIT UNDER HIGHEST DAILY LIFETIME 6 PLUS IS NOT
PAYABLE IF YOUR ACCOUNT VALUE IS REDUCED TO ZERO AS A RESULT OF WITHDRAWALS OR
IF ANNUITY PAYMENTS ARE BEING MADE AT THE TIME OF THE DECEDENT'S DEATH. THIS
DEATH BENEFIT MAY NOT BE AVAILABLE IN ALL STATES.
BENEFITS UNDER HIGHEST DAILY LIFETIME 6 PLUS
.. To the extent that your Account Value was reduced to zero as a result of
cumulative Lifetime Withdrawals in an Annuity Year that are less than or
equal to the Annual Income Amount, and amounts are still payable under
Highest Daily Lifetime 6 Plus, we will make an additional payment, if any,
for that Annuity Year equal to the remaining Annual Income Amount for the
Annuity Year. Thus, in that scenario, the remaining Annual Income Amount
would be payable even though your Account Value was reduced to zero. In
subsequent Annuity Years we make payments that equal the Annual Income
Amount as described in this section. We will make payments until the death
of the single designated life. If this occurs, you will not be permitted to
make additional purchase payments to your Annuity. To the extent that
cumulative withdrawals in the Annuity Year that reduced your Account Value
to zero are more than the Annual Income Amount, the Highest Daily Lifetime
6 Plus benefit terminates, and no additional payments are made. However, if
a withdrawal in the latter scenario was taken to satisfy a required minimum
distribution (as described above) under the Annuity, then the benefit will
not terminate, and we will continue to pay the Annual Income Amount in
subsequent Annuity Years until the death of the designated life. Please
note if your Account Value is reduced to zero as result of withdrawals, the
Death Benefit (described above under "Death Benefit Component of Highest
Daily Lifetime 6 Plus") will also be reduced to zero and the Death Benefit
will not be payable.
.. Please note that if your Account Value is reduced to zero, all subsequent
payments will be treated as annuity payments. Further, payments that we
make under this benefit after the first day of the calendar month
coinciding with or next following the annuitant's 95th birthday will be
treated as annuity payments.
.. If annuity payments are to begin under the terms of your Annuity, or if you
decide to begin receiving annuity payments and there is an Annual Income
Amount due in subsequent Annuity Years, you can elect one of the following
two options:
(1)apply your Account Value to any annuity option available; or
(2)request that, as of the date annuity payments are to begin, we make
annuity payments each year equal to the Annual Income Amount. If this
option is elected, the Annual Income Amount will not increase after
annuity payments have begun. We will make payments until the death of
the single designated life. We must receive your request in a form
acceptable to us at our office.
.. In the absence of an election when mandatory annuity payments are to begin,
we will make annual annuity payments in the form of a single life fixed
annuity with ten payments certain, by applying the greater of the annuity
rates then currently available or the annuity rates guaranteed in your
Annuity. The amount that will be applied to provide such annuity payments
will be the greater of:
(1)the present value of the future Annual Income Amount payments. Such
present value will be calculated using the greater of the single life
fixed annuity rates then currently available or the single life fixed
annuity rates guaranteed in your Annuity; and
(2)the Account Value.
If no Lifetime Withdrawal was ever taken, we will calculate the Annual Income
Amount as if you made your first Lifetime Withdrawal on the date the annuity
payments are to begin.
PLEASE NOTE THAT A DEATH BENEFIT (AS DESCRIBED ABOVE) IS NOT PAYABLE IF
ANNUITY PAYMENTS ARE BEING MADE AT THE TIME OF THE DECEDENT'S DEATH.
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OTHER IMPORTANT CONSIDERATIONS
.. Withdrawals under the Highest Daily Lifetime 6 Plus benefit are subject to
all of the terms and conditions of the Annuity as well as withdrawals that
exceed the Annual Income Amount. If you have an active Systematic
Withdrawal program running at the time you elect this benefit, the first
Systematic Withdrawal that processes after your election of the benefit
will be deemed a Lifetime Withdrawal.
.. Withdrawals made while the Highest Daily Lifetime 6 Plus Benefit is in
effect will be treated, for tax purposes, in the same way as any other
withdrawals under the Annuity. Any withdrawals made under the benefit will
be taken pro-rata from the Sub-accounts (including the AST Investment Grade
Bond Sub-account) and the DCA Fixed Rate Options (if you are participating
in the 6 or 12 Month DCA Program). Withdrawals from the DCA Fixed Rate
Options will be taken on a last-in, first-out basis.
.. You can make withdrawals from your Annuity while your Account Value is
greater than zero without purchasing the Highest Daily Lifetime 6 Plus
benefit. The Highest Daily Lifetime 6 Plus benefit provides a guarantee
that if your Account Value is reduced to zero (subject to our rules
regarding time and amount of withdrawals), you will be able to receive your
Annual Income Amount in the form of withdrawals.
.. You should carefully consider when to begin taking withdrawals. If you
begin taking withdrawals early, you may maximize the time during which you
may take withdrawals due to longer life expectancy, and you will be using
an optional benefit for which you are paying a charge. On the other hand,
you could limit the value of the benefit if you begin taking withdrawals
too soon. For example, withdrawals reduce your Account Value and may limit
the potential for increasing your Protected Withdrawal Value. You should
discuss with your Financial Professional when it may be appropriate for you
to begin taking withdrawals.
.. You cannot allocate purchase payments or transfer Account Value to or from
the AST Investment Grade Bond Sub-account. A summary description of the AST
Investment Grade Bond Portfolio appears within the prospectus section
entitled "What Are The Investment Objectives and Policies of The
Portfolios?". You can find a copy of the AST Investment Grade Bond
Portfolio prospectus by going to www.prudentialannuities.com.
.. Transfers to and from the Sub-accounts, the DCA Fixed Rate Options, and the
AST Investment Grade Bond Sub-account triggered by the Highest Daily
Lifetime 6 Plus mathematical formula will not count toward the maximum
number of free transfers allowable under an Annuity.
.. Upon inception of the benefit and to maintain the benefit, 100% of your
Account Value must be allocated to the Permitted Sub-accounts (or any DCA
Fixed Rate Options if you elect the 6 or 12 Month DCA Program). If,
subsequent to your election of the benefit, we change our requirements for
how Account Value must be allocated under the benefit, the new requirements
will apply only to new elections of the benefit, and we will not compel you
to reallocate your Account Value in accordance with our newly adopted
requirements. However, you may be required to reallocate due to the merger
of a Portfolio or the closing of a Portfolio. At the time of any change in
requirements, and as applicable only to new elections of the benefit,
transfer of Account Value and allocation of additional purchase payments
may be subject to new investment limitations.
.. If you elect this benefit and in connection with that election, you are
required to reallocate to different Sub-accounts, then on the Valuation Day
we receive your request in good order, we will (i) sell units of the
non-permitted investment options and (ii) invest the proceeds of those
sales in the Sub-accounts that you have designated. During this
reallocation process, your Account Value allocated to the Sub-accounts will
remain exposed to investment risk, as is the case generally. The
newly-elected benefit will commence at the close of business on the
following Valuation Day. Thus, the protection afforded by the newly-elected
benefit will not arise until the close of business on the following
Valuation Day.
.. The Basic Death Benefit will terminate if withdrawals taken under Highest
Daily Lifetime 6 Plus cause your Account Value to reduce to zero. Certain
optional Death Benefits may terminate if withdrawals taken under Highest
Daily Lifetime 6 Plus cause your Account Value to reduce to zero. (See
"Death Benefit" for more information.)
.. The maximum charge for Highest Daily Lifetime 6 Plus is 1.50% annually of
the greater of the Account Value and Protected Withdrawal Value. The
current charge is 0.85% annually of the greater of the Account Value and
Protected Withdrawal Value. We deduct this charge on quarterly
anniversaries of the benefit effective date. Thus, we deduct, on a
quarterly basis 0.2125% of the greater of the prior Valuation Day's Account
Value and the prior Valuation Day's Protected Withdrawal Value. We deduct
the fee pro rata from each of your Sub-accounts, including the AST
Investment Grade Bond Sub-account, and the DCA Fixed Rate Options (if
applicable). Since this fee is based on the greater of the Account Value
and Protected Withdrawal Value, the fee for Highest Daily Lifetime 6 Plus
may be greater than it would have been, had it been based on the Account
Value alone. You will begin paying the charge for this benefit as of the
effective date of the benefit, even if you do not begin taking withdrawals
for many years, or ever. We will not refund the charges you have paid if
you choose never to take any withdrawals and/or if you never receive any
lifetime income payments. The following example is hypothetical and is for
illustrative purposes only.
Assuming a benefit effective date of September 1, 2009 (which means that
quarterly benefit anniversaries are: December 1, March 1, June 1, and
September 1). Assume the Protected Withdrawal Value as of November 30, 2009
(prior Valuation Day's Protected Withdrawal Value) = $200,000.00 and the
Account Value as of November 30, 2009 (prior Valuation Day's Account Value) =
$195,000.00. The first benefit charge date would be December 1, 2009 and the
benefit charge amount would be $425.00 ($200,000 X .2125%).
If the deduction of the charge would result in the Account Value falling below
the lesser of $500 or 5% of the sum of the Account Value on the effective date
of the benefit plus all purchase payments made subsequent thereto (we refer to
this as the "Account
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Value Floor"), we will only deduct that portion of the charge that would not
cause the Account Value to fall below the Account Value Floor. If the entire
Account Value is less than the Account Value Floor when we would deduct a
charge for the benefit, then no charge will be assessed for that benefit
quarter. If a charge for the Highest Daily Lifetime 6 Plus benefit would be
deducted on the same day we process a withdrawal request, the charge will be
deducted first, then the withdrawal will be processed. The withdrawal could
cause the Account Value to fall below the Account Value Floor. While the
deduction of the charge (other than the final charge) may not reduce the
Account Value to zero, withdrawals may reduce the Account Value to zero. If
this happens and the Annual Income Amount is greater than zero, we will make
payments under the benefit and the Death Benefit (described above) will not be
payable.
ELECTION OF AND DESIGNATIONS UNDER THE BENEFIT
For Highest Daily Lifetime 6 Plus, there must be either a single Owner who is
the same as the Annuitant, or if the Annuity is entity owned, there must be a
single natural person Annuitant. In either case, the Annuitant must be at
least 45 years old.
Any change of the Annuitant under the Annuity will result in cancellation of
Highest Daily Lifetime 6 Plus. Similarly, any change of Owner will result in
cancellation of Highest Daily Lifetime 6 Plus, except if (a) the new Owner has
the same taxpayer identification number as the previous owner, (b) ownership
is transferred from a custodian to the Annuitant, or vice versa or
(c) ownership is transferred from one entity to another entity that is
satisfactory to us.
Highest Daily Lifetime 6 Plus can be elected at the time that you purchase
your Annuity or after the Issue Date, subject to availability, and our
eligibility rules and restrictions. If you elect Highest Daily Lifetime 6 Plus
and terminate it, you can re-elect it or elect any other living benefit,
subject to our current rules and availability. Additionally, if you currently
own an Annuity with a living benefit that is terminable, you may terminate
your existing benefit rider and elect any available benefits subject to our
current rules. See "Termination of Existing Benefits and Election of New
Benefits" in the prospectus for information pertaining to elections,
termination and re-election of benefits. PLEASE NOTE THAT IF YOU TERMINATE A
LIVING BENEFIT AND ELECT A NEW LIVING BENEFIT, YOU LOSE THE GUARANTEES THAT
YOU HAD ACCUMULATED UNDER YOUR EXISTING BENEFIT AND WE WILL BASE ANY
GUARANTEES UNDER THE NEW BENEFIT ON YOUR ACCOUNT VALUE AS OF THE DATE THE NEW
BENEFIT BECOMES ACTIVE. You and your financial professional should carefully
consider whether terminating your existing benefit and electing a new benefit
is appropriate for you. We reserve the right to waive, change and/or further
limit the election frequency in the future.
TERMINATION OF THE BENEFIT
You may terminate Highest Daily Lifetime 6 Plus at any time by notifying us.
If you terminate the benefit, any guarantee provided by the benefit will
terminate as of the date the termination is effective, and certain
restrictions on re-election may apply. The benefit automatically terminates:
(i) upon your termination of the benefit, (ii) upon your surrender of the
Annuity, (iii) upon your election to begin receiving annuity payments
(although if you have elected to receive the Annual Income Amount in the form
of annuity payments, we will continue to pay the Annual Income Amount),
(iv) upon our receipt of due proof of the death of the Annuitant (except
insofar as paying the Death Benefit associated with this benefit), (v) if both
the Account Value and Annual Income Amount equal zero, or (vi) if you cease to
meet our requirements as described in "Election of and Designations under the
Benefit" above.
Upon termination of Highest Daily Lifetime 6 Plus other than upon the death of
the Annuitant or annuitization, we impose any accrued fee for the benefit
(i.e., the fee for the pro-rated portion of the year since the fee was last
assessed), and thereafter we cease deducting the charge for the benefit. This
final charge will be deducted even if it results in the Account Value falling
below the Account Value Floor. With regard to your investment allocations,
upon termination we will: (i) leave intact amounts that are held in the
Permitted Sub-accounts (including any amounts in the DCA Fixed Rate Options),
and (ii) unless you are participating in an asset allocation program (i.e.,
Custom Portfolios Program (we may have referred to the "Custom Portfolios
Program" as the "Optional Allocation and Rebalancing Program" in other
materials), Automatic Rebalancing Program, or 6 or 12 Month DCA Program for
which we are providing administrative support), transfer all amounts held in
the AST Investment Grade Bond Sub-account to your variable investment options,
pro rata (i.e. in the same proportion as the current balances in your variable
investment options). If, prior to the transfer from the AST Investment Grade
Bond Sub-account, the Account Value in the variable investment options is
zero, we will transfer such amounts according to your most recent allocation
instructions.
If a surviving spouse elects to continue the Annuity, the Highest Daily
Lifetime 6 Plus benefit terminates. The spouse may elect the benefit subject
to the restrictions discussed above.
HOW HIGHEST DAILY LIFETIME 6 PLUS TRANSFERS ACCOUNT VALUE BETWEEN YOUR
PERMITTED SUB-ACCOUNTS AND THE AST INVESTMENT GRADE BOND SUB-ACCOUNT
As indicated above, we limit the Sub-accounts to which you may allocate
Account Value if you elect Highest Daily Lifetime 6 Plus. For purposes of this
benefit, we refer to those permitted investment options as the "Permitted
Sub-accounts". Because these restrictions and the use of the predetermined
mathematical formula lessen the risk that your Account Value will be reduced
to zero while you are still alive, they also reduce the likelihood that we
will make any lifetime income payments under this benefit. They may also limit
your upside potential for growth. If your Annuity was issued on or after May
1, 2009 (subject to regulatory approval), you may also choose to allocate
purchase payments while this program is in effect to DCA Fixed Rate Options
utilized
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with our 6 or 12 Month Dollar Cost Averaging Program ("6 or 12 Month DCA
Program"). If you are participating in Highest Daily Lifetime 6 Plus and also
are participating in the 6 or 12 Month DCA Program, and the formula under the
benefit dictates a transfer from the Permitted Sub-accounts to the AST
Investment Grade Bond Sub-account (the "Bond Sub-account"), then the amount to
be transferred will be taken entirely from the Sub-accounts, provided there is
sufficient Account Value in those Sub-accounts to meet the required transfer
amount. Only if there is insufficient Account Value in those Sub-accounts will
an amount be withdrawn from the DCA Fixed Rate Options. Amounts withdrawn from
the DCA Fixed Rate Options under the formula will be taken on a last-in,
first-out basis. For purposes of the discussion below concerning transfers
from the Permitted Sub-accounts to the Bond Sub-account, amounts held within
the DCA Fixed Rate Options are included within the term "Permitted
Sub-Accounts". Thus, amounts may be transferred from the DCA Fixed Rate
Options in the circumstances described above and in the section of the
prospectus entitled 6 or 12 Month Dollar Cost Averaging Program. Any transfer
dictated by the formula out of the Bond Sub-account will only be transferred
to the Permitted Sub-accounts, not the DCA Fixed Rate Options.
An integral part of Highest Daily Lifetime 6 Plus (including Highest Daily
Lifetime 6 Plus with LIA and Spousal Highest Daily Lifetime 6 Plus) is the
predetermined mathematical formula used to transfer Account Value between the
Permitted Sub-accounts and the Bond Sub-account. This predetermined
mathematical formula ("formula") runs each Valuation Day that the benefit is
in effect on your Annuity and, as a result, transfers of Account Value between
the Permitted Sub-accounts and the Bond Sub-account can occur on any Valuation
Day subject to the conditions described below. Only the predetermined
mathematical formula can transfer Account Value to and from the Bond
Sub-account, and thus you may not allocate Purchase Payments to or make
transfers to or from the Bond Sub-account. We are not providing you with
investment advice through the use of the formula. The formula by which the
transfer operates is designed primarily to mitigate some of the financial
risks that we incur in providing the guarantee under Highest Daily Lifetime 6
Plus. The formula is not forward looking and contains no predictive or
projective component with respect to the markets, the Account Value or the
Protected Withdrawal Value. The formula is set forth in Appendix P.
Generally, the formula, which is applied each Valuation Day, operates as
follows. The formula starts by identifying an income basis for that day and
then multiplies that figure by 5%, to produce a projected (i.e., hypothetical)
income amount. This amount may be different than the actual Annual Income
Amount currently guaranteed under your benefit. Then it produces an estimate
of the total amount targeted in the formula, based on the projected income
amount and factors set forth in the formula. In the formula, we refer to that
value as the "Target Value" or "L". If you have already made a Lifetime
Withdrawal, your projected income amount (and thus your Target Value) would
take into account any automatic step-up, any subsequent Purchase Payments, and
any withdrawals of Excess Income. Next, the formula subtracts from the Target
Value the amount held within the Bond Sub-account on that day, and divides
that difference by the amount held within the Permitted Sub-accounts including
any amounts allocated to DCA Fixed Rate Options. That ratio, which essentially
isolates the amount of your Target Value that is not offset by amounts held
within the Bond Sub-account, is called the "Target Ratio" or "r". If, on each
of three consecutive Valuation Days, the Target Ratio is greater than 83% but
less than or equal to 84.5%, the formula will, on such third Valuation Day,
make a transfer from the Permitted Sub-accounts in which you are invested
(subject to the 90% cap discussed below) to the Bond Sub-account. As discussed
above, if all or a portion of your Account Value is allocated to one or more
DCA Fixed Rate Options at the time a transfer to the Bond Sub-account is
required under the formula, we will first look to process the transfer from
the Permitted Sub-accounts, other than the DCA Fixed Rate Options. If the
amount allocated to the Permitted Sub-accounts is insufficient to satisfy the
transfer, then any remaining amounts will be transferred from the DCA Fixed
Rate Options on a "last-in, first-out" basis. Once a transfer is made, the
Target Ratio must again be greater than 83% but less than or equal to 84.5%
for three consecutive Valuation Days before a subsequent transfer to the Bond
Sub-account will occur. If, however, on any Valuation Day, the Target Ratio is
above 84.5%, the formula will make a transfer from the Permitted Sub-accounts
(subject to the 90% cap) to the Bond Sub-account (as described above). If the
Target Ratio falls below 78% on any Valuation Day, then a transfer from the
Bond Sub-account to the Permitted Sub-accounts (excluding the DCA Fixed Rate
Options) will occur.
The formula will not execute a transfer to the Bond Sub-account that results
in more than 90% of your Account Value being allocated to the Bond Sub-account
("90% cap") on that Valuation Day. Thus, on any Valuation Day, if the formula
would require a transfer to the Bond Sub-account that would result in more
than 90% of the Account Value being allocated to the Bond Sub-account, only
the amount that results in exactly 90% of the Account Value being allocated to
the Bond Sub-account will be transferred. Additionally, future transfers into
the Bond Sub-account will not be made (regardless of the performance of the
Bond Sub-account and the Permitted Sub-accounts) at least until there is first
a transfer out of the Bond Sub-account. Once this transfer occurs out of the
Bond Sub-account, future amounts may be transferred to or from the Bond
Sub-account if dictated by the formula (subject to the 90% cap). At no time
will the formula make a transfer to the Bond Sub-account that results in
greater than 90% of your Account Value being allocated to the Bond
Sub-account. However, it is possible that, due to the investment performance
of your allocations in the Bond Sub-account and your allocations in the
Permitted Sub-accounts you have selected, your Account Value could be more
than 90% invested in the Bond Sub-account.
If you make additional Purchase Payments to your Annuity while the 90% cap is
in effect, the formula will not transfer any of such additional Purchase
Payments to the Bond Sub-account at least until there is first a transfer out
of the Bond Sub-account, regardless of how much of your Account Value is in
the Permitted Sub-accounts. This means that there could be scenarios under
which, because of the additional Purchase Payments you make, less than 90% of
your entire Account Value is allocated to the Bond
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Sub-account, and the formula will still not transfer any of your Account Value
to the Bond Sub-account (at least until there is first a transfer out of the
Bond Sub-account). For example,
.. September 4, 2012 - a transfer is made to the Bond Sub-account that results
in the 90% cap being met and now $90,000 is allocated to the Bond
Sub-account and $10,000 is allocated to the Permitted Sub-accounts.
.. September 5, 2012 - you make an additional Purchase Payment of $10,000. No
transfers have been made from the Bond Sub-account to the Permitted
Sub-accounts since the cap went into effect on September 4, 2012.
.. On September 5, 2012 - (and at least until first a transfer is made out of
the Bond Sub-account under the formula) - the $10,000 payment is allocated
to the Permitted Sub-accounts and on this date you have 82% in the Bond
Sub-account and 18% in the Permitted Sub-accounts (such that $20,000 is
allocated to the Permitted Sub-accounts and $90,000 to the Bond
Sub-account).
.. Once there is a transfer out of the Bond Sub-account (of any amount), the
formula will operate as described above, meaning that the formula could
transfer amounts to or from the Bond Sub-account if dictated by the formula
(subject to the 90% cap).
Under the operation of the formula, the 90% cap may come into and out of
effect multiple times while you participate in the benefit. We will continue
to monitor your Account Value daily and, if dictated by the formula,
systematically transfer amounts between the Permitted Sub-accounts you have
chosen and the Bond Sub-account as dictated by the formula.
Under the formula, investment performance of your Account Value that is
negative, flat, or even moderately positive may result in a transfer of a
portion of your Account Value in the Permitted Sub-accounts to the Bond
Sub-account because such investment performance will tend to increase the
Target Ratio. In deciding how much to transfer, we use another formula, which
essentially seeks to reallocate amounts held in the Permitted Sub-accounts and
the Bond Sub-account so that the Target Ratio meets a target, which currently
is equal to 80%. The further the Target Ratio is from 80% when a transfer is
occurring under the formula, the greater the transfer amount will be. Once you
elect Highest Daily Lifetime 6 Plus, the values we use to compare to the
Target Ratio will be fixed. For newly-issued Annuities that elect Highest
Daily Lifetime 6 Plus and existing Annuities that elect Highest Daily Lifetime
6 Plus in the future, however, we reserve the right to change such values.
Additionally, on each monthly Annuity Anniversary (if the monthly Annuity
Anniversary does not fall on a Valuation Day, the next Valuation Day will be
used), following all of the above described daily calculations, if there is
money allocated to the Bond Sub-account, we will perform an additional monthly
calculation to determine whether or not a transfer will be made from the Bond
Sub-account to the Permitted Sub-accounts. This transfer will automatically
occur provided that the Target Ratio, as described above, would be less than
83% after the transfer. The formula will not execute a transfer if the Target
Ratio after this transfer would occur would be greater than or equal to 83%.
The amount of the transfer will be equal to the lesser of:
a) The total value of all your Account Value in the Bond Sub-account, or
b) An amount equal to 5% of your total Account Value.
While you are not notified when your Annuity reaches a transfer trigger under
the formula, you will receive a confirmation statement indicating the transfer
of a portion of your Account Value either to or from the Bond Sub-account.
Depending on the results of the calculations of the formula, we may, on any
Valuation Day:
.. Not make any transfer between the Permitted Sub-accounts and the Bond
Sub-account; or
.. If a portion of your Account Value was previously allocated to the Bond
Sub-account, transfer all or a portion of those amounts to the Permitted
Sub-accounts (as described above); or
.. Transfer a portion of your Account Value in the Permitted Sub-accounts and
the DCA Fixed Rate Options to the Bond Sub-account.
Prior to the first Lifetime Withdrawal, the primary driver of transfers to the
Bond Sub-account is the difference between your Account Value and your
Protected Withdrawal Value. If none of your Account Value is allocated to the
Bond Sub-account, then over time the formula permits an increasing difference
between the Account Value and the Protected Withdrawal Value before a transfer
to the Bond Sub-account occurs. Therefore, as time goes on, while none of your
Account Value is allocated to the Bond Sub-account, the smaller the difference
between the Protected Withdrawal Value and the Account Value, the more the
Account Value can decrease prior to a transfer to the Bond Sub-account.
Each market cycle is unique, therefore the performance of your Sub-accounts,
and its impact on your Account Value, will differ from market cycle to market
cycle producing different transfer activity under the formula. The amount and
timing of transfers to and from the Bond Sub-account pursuant to the formula
depend on various factors unique to your Annuity and are not necessarily
directly correlated with the securities markets, bond markets, interest rates
or any other market or index. Some of the factors that determine the amount
and timing of transfers (as applicable to your Annuity), include:
.. The difference between your Account Value and your Protected Withdrawal
Value;
.. The amount of time Highest Daily Lifetime 6 Plus has been in effect on your
Annuity;
.. The amount allocated to and the performance of the Permitted Sub-accounts
and the Bond Sub-account;
.. Any additional Purchase Payments you make to your Annuity (while the
benefit is in effect); and
.. Any withdrawals you take from your Annuity (while the benefit is in effect).
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At any given time, some, most or none of your Account Value will be allocated
to the Bond Sub-account, as dictated by the formula.
Because the amount allocated to the Bond Sub-account and the amount allocated
to the Permitted Sub-accounts each is a variable in the formula, the
investment performance of each affects whether a transfer occurs for your
Annuity. The greater the amounts allocated to either the Bond Sub-account or
to the Permitted Sub-accounts, the greater the impact performance of that
Sub-account has on your Account Value and thus the greater the impact on
whether (and how much) your Account Value is transferred to or from the Bond
Sub-account. It is possible, under the formula, that if a significant portion
of your Account Value is allocated to the Bond Sub-account and that
Sub-account has positive performance, the formula might transfer a portion of
your Account Value to the Permitted Sub-accounts, even if the performance of
your Permitted Sub-accounts is negative. Conversely, if a significant portion
of your Account Value is allocated to the Bond Sub-account and that
Sub-account has negative performance, the formula may transfer additional
amounts from your Permitted Sub-accounts to the Bond Sub-account even if the
performance of your Permitted Sub-accounts is positive.
If you make additional Purchase Payments to your Annuity, they will be
allocated in accordance with your Annuity. Once allocated, they will also be
subject to the formula described above and therefore may be transferred to the
Bond Sub-account, if dictated by the formula and subject to the 90% cap
feature described above.
Any Account Value in the Bond Sub-account will not participate in the positive
or negative investment experience of the Permitted Sub-accounts until it is
transferred out of the Bond Sub-account.
ADDITIONAL TAX CONSIDERATIONS
If you purchase an annuity as an investment vehicle for "qualified"
investments, including an IRA, SEP-IRA, Tax Sheltered Annuity (or 403(b)) or
employer plan under Code Section 401(a), the required minimum distribution
rules under the Code provide that you begin receiving periodic amounts from
your annuity beginning after age 70 1/2. For a Tax Sheltered Annuity or a
401(a) plan for which the participant is not a greater than five (5) percent
owner of the employer, this required beginning date can generally be deferred
to retirement, if later. Roth IRAs are not subject to these rules during the
owner's lifetime. The amount required under the Code may exceed the Annual
Income Amount, which will cause us to increase the Annual Income Amount in any
Annuity Year that required minimum distributions due from your Annuity are
greater than such amounts. In addition, the amount and duration of payments
under the annuity payment and death benefit provisions may be adjusted so that
the payments do not trigger any penalty or excise taxes due to tax
considerations such as required minimum distribution provisions under the tax
law.
As indicated, withdrawals made while this benefit is in effect will be
treated, for tax purposes, in the same way as any other withdrawals under the
Annuity. Please see the Tax Considerations section of the prospectus for a
detailed discussion of the tax treatment of withdrawals. We do not address
each potential tax scenario that could arise with respect to this benefit
here. However, we do note that if you participate in Highest Daily Lifetime 6
Plus through a non-qualified annuity, as with all withdrawals, once all
purchase payments are returned under the Annuity, all subsequent withdrawal
amounts will be taxed as ordinary income.
HIGHEST DAILY LIFETIME 6 PLUS WITH LIFETIME INCOME ACCELERATOR
We offer another version of Highest Daily Lifetime 6 Plus that we call Highest
Daily Lifetime 6 Plus with Lifetime Income Accelerator ("Highest Daily
Lifetime 6 Plus with LIA"). Highest Daily Lifetime 6 Plus with LIA guarantees,
until the death of the single designated life, the ability to withdraw an
amount equal to double the Annual Income Amount (which we refer to as the "LIA
Amount") if you meet the conditions set forth below. This version is only
being offered in those jurisdictions where we have received regulatory
approval and will be offered subsequently in other jurisdictions when we
receive regulatory approval in those jurisdictions. Highest Daily Lifetime 6
Plus with LIA is not available in New York and certain other
states/jurisdictions. You may choose Highest Daily Lifetime 6 Plus with or
without also electing LIA, however you may not elect LIA without Highest Daily
Lifetime 6 Plus and you must elect the LIA benefit at the time you elect
Highest Daily Lifetime 6 Plus. If you elect Highest Daily Lifetime 6 Plus
without LIA and would like to add the feature later, you must terminate the
Highest Daily Lifetime 6 Plus benefit and elect the Highest Daily Lifetime 6
Plus with LIA (subject to availability and benefit re-election provisions).
Please note that if you terminate Highest Daily Lifetime 6 Plus and elect the
Highest Daily Lifetime 6 Plus with LIA you lose the guarantees that you had
accumulated under your existing benefit and we will base any guarantees under
the new benefit on your Account Value as of the date the new benefit becomes
active. Highest Daily Lifetime 6 Plus with LIA is offered as an alternative to
other lifetime withdrawal options. If you elect this benefit, it may not be
combined with any other optional living benefit or the Plus 40 life insurance
rider or the Highest Daily Value death benefit. As long as your Highest Daily
Lifetime 6 Plus with LIA benefit is in effect, you must allocate your Account
Value in accordance with the permitted and available investment option(s) with
this benefit. The income benefit under Highest Daily Lifetime 6 Plus with LIA
currently is based on a single "designated life" who is between the ages of 45
and 75 on the date that the benefit is elected and received in good order. All
terms and conditions of Highest Daily Lifetime 6 Plus apply to this version of
the benefit, except as described herein.
Highest Daily Lifetime 6 Plus with LIA is not long-term care insurance and
should not be purchased as a substitute for long-term care insurance. The
income you receive through the Lifetime Income Accelerator may be used for any
purpose, and it may or may not be sufficient to address expenses you may incur
for long-term care. You should seek professional advice to determine your
financial needs for long-term care.
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If you elect the Highest Daily Lifetime 6 Plus with LIA, the maximum charge is
2.00% annually of the greater of the Account Value and Protected Withdrawal
Value. The current charge is 1.20% annually of the greater of Account Value
and Protected Withdrawal Value. We deduct this charge on quarterly
anniversaries of the benefit effective date. Thus, we deduct, on a quarterly
basis, 0.30% of the greater of the prior Valuation Day's Account Value and the
prior Valuation Day's Protected Withdrawal Value. We deduct the fee pro rata
from each of your Sub-accounts, including the AST Investment Grade Bond
Sub-account, and the DCA Fixed Rate Options (if applicable). Since this fee is
based on the greater of the Account Value and Protected Withdrawal Value, the
fee for Highest Daily Lifetime 6 Plus with LIA may be greater than it would
have been, had it been based on the Account Value alone. The following example
is hypothetical and is for illustrative purposes only.
Assuming a benefit effective date of September 1, 2009 (which means that
quarterly benefit anniversaries are: December 1, March 1, June 1, and
September 1). Assume the Protected Withdrawal Value as of November 30, 2009
(prior Valuation Day's Protected Withdrawal Value) = $200,000.00 and the
Account Value as of November 30, 2009 (prior Valuation Day's Account Value) =
$195,000.00. The first benefit charge date would be December 1, 2009 and the
benefit charge amount would be $600.00 ($200,000 X .30%)
If the deduction of the charge would result in the Account Value falling below
the lesser of $500 or 5% of the sum of the Account Value on the effective date
of the benefit plus all purchase payments made subsequent thereto (we refer to
this as the "Account Value Floor"), we will only deduct that portion of the
charge that would not cause the Account Value to fall below the Account Value
Floor. If the entire Account Value is less than the Account Value Floor when
we would deduct a charge for the benefit, then no charge will be assessed for
that benefit quarter. If a charge for the Highest Daily Lifetime 6 Plus with
LIA benefit would be deducted on the same day we process a withdrawal request,
the charge will be deducted first, then the withdrawal will be processed. The
withdrawal could cause the Account Value to fall below the Account Value
Floor. While the deduction of the charge (other than the final charge) may not
reduce the Account Value to zero, withdrawals may reduce the Account Value to
zero. If this happens and the Annual Income Amount is greater than zero, we
will make payments under the benefit and the Death Benefit (described below)
will not be payable.
If this benefit is being elected on an Annuity held as a 403(b) plan, then in
addition to meeting the eligibility requirements listed below for the LIA
Amount you must separately qualify for distributions from the 403(b) plan
itself.
ELIGIBILITY REQUIREMENTS FOR LIA AMOUNT. Both a waiting period of 36 months
from the benefit effective date, and an elimination period of 120 days from
the date of notification that one or both of the requirements described
immediately below have been met, apply before you can become eligible for the
LIA Amount. The 120 day elimination period begins on the date that we receive
notification from you of your eligibility for the LIA Amount. Thus, assuming
the 36 month waiting period has been met and we have received the notification
referenced in the immediately preceding sentence, the LIA amount would be
available for withdrawal on the Valuation Day immediately after the 120th day.
The waiting period and the elimination period may run concurrently. In
addition to satisfying the waiting and elimination period, at least one of the
following requirements ("LIA conditions") must be met.
(1)The designated life is confined to a qualified nursing facility. A
qualified nursing facility is a facility operated pursuant to law or any
state licensed facility providing medically necessary in-patient care which
is prescribed by a licensed physician in writing and based on physical
limitations which prohibit daily living in a non-institutional setting.
(2)The designated life is unable to perform two or more basic abilities of
caring for oneself or "activities of daily living." We define these basic
abilities as:
i. Eating: Feeding oneself by getting food into the body from a receptacle
(such as a plate, cup or table) or by a feeding tube or intravenously.
ii.Dressing: Putting on and taking off all items of clothing and any
necessary braces, fasteners or artificial limbs.
iii.Bathing: Washing oneself by sponge bath; or in either a tub or shower,
including the task of getting into or out of the tub or shower.
iv.Toileting: Getting to and from the toilet, getting on and off the
toilet, and performing associated personal hygiene.
v. Transferring: Moving into or out of a bed, chair or wheelchair.
vi.Continence: Maintaining control of bowel or bladder function; or when
unable to maintain control of bowel or bladder function, the ability to
perform personal hygiene (including caring for catheter or colostomy
bag).
You must notify us in writing when the LIA conditions have been met. If, when
we receive such notification, there are more than 120 days remaining until the
end of the waiting period described above, you will not be eligible for the
LIA Amount. If there are 120 days or less remaining until the end of the
waiting period when we receive notification that the LIA conditions are met,
we will determine eligibility for the LIA Amount through our then current
administrative process, which may include, but is not limited to,
documentation verifying the LIA conditions and/or an assessment by a third
party of our choice. Such assessment may be in person and we will assume any
costs associated with the aforementioned assessment. The designated life must
be available for any assessment or reassessment pursuant to our administrative
process requirements. Once eligibility is determined, the LIA Amount is equal
to double the Annual Income Amount as described above under the Highest Daily
Lifetime 6 Plus benefit.
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Additionally, once eligibility is determined, we will reassess your
eligibility on an annual basis although your LIA benefit for the year that
immediately precedes our reassessment will not be affected if it is determined
that you are no longer eligible. Your first reassessment may occur in the same
year as your initial assessment. If we determine that you are no longer
eligible to receive the LIA Amount, upon the next Annuity Anniversary the
Annual Income Amount would replace the LIA Amount. However, if you were
receiving income based on the LIA Amount and do not take action to change your
withdrawal amount to your Annual Income Amount, any cumulative Lifetime
Withdrawals in an Annuity Year that are in excess of the Annual Income Amount
will impact your Annual Income Amount in subsequent years (except with regard
to Required Minimum Distributions for this Annuity that comply with our
rules). Please note that we will not change your current withdrawal amount
unless you instruct us to do so. If you wish to establish or make changes to
your existing withdrawal program to ensure that you are not taking Excess
Income, please contact our Annuity Service Office. There is no limit on the
number of times you can become eligible for the LIA Amount, however, each time
would require the completion of the 120-day elimination period, notification
that the designated life meets the LIA conditions, and determination, through
our then current administrative process, that you are eligible for the LIA
Amount, each as described above.
LIA AMOUNT AT THE FIRST LIFETIME WITHDRAWAL. If your first Lifetime Withdrawal
subsequent to election of Highest Daily Lifetime 6 Plus with LIA occurs while
you are eligible for the LIA Amount, the available LIA Amount is equal to
double the Annual Income Amount.
LIA AMOUNT AFTER THE FIRST LIFETIME WITHDRAWAL. If you become eligible for the
LIA Amount after you have taken your first Lifetime Withdrawal, the available
LIA amount for the current and subsequent Annuity Years is equal to double the
then current Annual Income Amount, however the available LIA amount in the
current Annuity Year is reduced by any Lifetime Withdrawals that have been
taken in the current Annuity Year. Cumulative Lifetime Withdrawals in an
Annuity Year which are less than or equal to the LIA Amount (when eligible for
the LIA amount) will not reduce your LIA Amount in subsequent Annuity Years,
but any such withdrawals will reduce the LIA Amount on a dollar-for-dollar
basis in that Annuity Year. If you have an active Systematic Withdrawal
program running at the time you elect this benefit, the first Systematic
Withdrawal that processes after your election of the LIA benefit will be
deemed a Lifetime Withdrawal.
WITHDRAWALS IN EXCESS OF THE LIA AMOUNT. If your cumulative Lifetime
Withdrawals in an Annuity Year are in excess of the LIA Amount when you are
eligible ("Excess Withdrawal"), your LIA Amount in subsequent years will be
reduced (except with regard to required minimum distributions) by the result
of the ratio of the excess portion of the withdrawal to the Account Value
immediately prior to the Excess Withdrawal. Reductions include the actual
amount of the withdrawal. Withdrawals of any amount (excluding the
Non-Lifetime Withdrawal) up to and including the LIA Amount will reduce the
Protected Withdrawal Value by the amount of the withdrawal. Excess Withdrawals
will reduce the Protected Withdrawal Value by the same ratio as the reduction
to the LIA Amount.
WITHDRAWALS ARE NOT REQUIRED. However, subsequent to the first Lifetime
Withdrawal, the LIA Amount is not increased in subsequent Annuity Years if you
decide not to take a withdrawal in an Annuity Year or take withdrawals in an
Annuity Year that in total are less than the LIA Amount.
PURCHASE PAYMENTS. If you are eligible for the LIA Amount as described under
"Eligibility Requirements for LIA Amount" and you make an additional purchase
payment, the Annual Income Amount is increased by an amount obtained by
applying the applicable percentage (4% for ages 45 - less than 59 1/2; 5% for
ages 59 1/2-79; and 6% for ages 80 and older) to the purchase payment. The
applicable percentage is based on the attained age of the designated life on
the date of the first Lifetime Withdrawal after the benefit effective date.
The LIA Amount is increased by double the Annual Income Amount, if eligibility
for LIA has been met. The Protected Withdrawal Value is increased by the
amount of each purchase payment.
If the Annuity permits additional purchase payments, we may limit any
additional purchase payment(s) if we determine that as a result of the timing
and amounts of your additional purchase payments and withdrawals, the Annual
Income Amount (or, if eligible for LIA, the LIA Amount) is being increased in
an unintended fashion. Among the factors we will use in making a determination
as to whether an action is designed to increase the Annual Income Amount (or,
if eligible for LIA, the LIA Amount) in an unintended fashion is the relative
size of additional purchase payment(s). Subject to state law, we reserve the
right to not accept additional purchase payments if we are not then offering
this benefit for new elections. We will exercise such reservation of right for
all annuity purchasers in the same class in a nondiscriminatory manner.
STEP-UPS. If your Annual Income Amount is stepped up, your LIA Amount will be
stepped up to equal double the stepped up Annual Income Amount.
GUARANTEE PAYMENTS. If your Account Value is reduced to zero as a result of
cumulative withdrawals that are equal to or less than the LIA Amount when you
are eligible, and there is still a LIA Amount available, we will make an
additional payment for that Annuity Year equal to the remaining LIA Amount. If
this were to occur, you are not permitted to make additional purchase payments
to your Annuity. Thus, in that scenario, the remaining LIA Amount would be
payable even though your Account Value was reduced to zero. In subsequent
Annuity Years we make payments that equal the LIA Amount as described in this
section. We
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will make payments until the death of the single designated life. Should the
designated life no longer qualify for the LIA amount (as described under
"Eligibility Requirements for LIA Amount" above), the Annual Income Amount
would continue to be available. Subsequent eligibility for the LIA Amount
would require the completion of the 120 day elimination period as well as
meeting the LIA conditions listed above under "Eligibility Requirements for
LIA Amount". TO THE EXTENT THAT CUMULATIVE WITHDRAWALS IN THE CURRENT ANNUITY
YEAR THAT REDUCE YOUR ACCOUNT VALUE TO ZERO ARE MORE THAN THE LIA AMOUNT
(EXCEPT IN THE CASE OF REQUIRED MINIMUM DISTRIBUTIONS), HIGHEST DAILY LIFETIME
6 PLUS WITH LIA TERMINATES, AND NO ADDITIONAL PAYMENTS ARE MADE. A DEATH
BENEFIT UNDER HIGHEST DAILY LIFETIME 6 PLUS WITH LIA IS NOT PAYABLE IF
GUARANTEE PAYMENTS ARE BEING MADE AT THE TIME OF THE DECEDENT'S DEATH.
ANNUITY OPTIONS. In addition to the Highest Daily Lifetime 6 Plus annuity
options described above, after the tenth anniversary of the benefit effective
date ("Tenth Anniversary"), you may also request that we make annuity payments
each year equal to the Annual Income Amount. In any year that you are eligible
for the LIA Amount, we make annuity payments equal to the LIA Amount. If you
would receive a greater payment by applying your Account Value to receive
payments for life under your Annuity, we will pay the greater amount.
Annuitization prior to the Tenth Anniversary will forfeit any present or
future LIA amounts. We will continue to make payments until the death of the
designated life. If this option is elected, the Annual Income Amount and LIA
Amount will not increase after annuity payments have begun. A Death Benefit is
not payable if annuity payments are being made at the time of the decedent's
death.
If you elect Highest Daily Lifetime 6 Plus with LIA, and never meet the
eligibility requirements you will not receive any additional payments based on
the LIA Amount.
DEATH BENEFIT COMPONENT OF HIGHEST DAILY LIFETIME 6 PLUS WITH LIA. The
provisions of the Death Benefit Component of Highest Daily Lifetime 6 Plus
(see above for information about the Death Benefit) also apply to Highest
Daily Lifetime Plus with LIA. Please note that with respect to Highest Daily
Lifetime 6 Plus with LIA, we use the Annual Income Amount for purposes of the
Death Benefit Calculations, not the LIA Amount.
SPOUSAL HIGHEST DAILY LIFETIME 6 PLUS INCOME BENEFIT (SHD6 PLUS)
Spousal Highest Daily Lifetime 6 Plus is the spousal version of Highest Daily
Lifetime 6 Plus. Spousal Highest Daily Lifetime 6 Plus must be elected based
on two designated lives, as described below. The youngest designated life must
be at least 50 years old and the oldest designated life must be at least 55
years old when the benefit is elected. Spousal Highest Daily Lifetime 6 Plus
is not available if you elect any other optional benefit. As long as your
Spousal Highest Daily Lifetime 6 Plus Benefit is in effect, you must allocate
your Account Value in accordance with the permitted Sub-accounts and other
investment option(s) available with this benefit. For a more detailed
description of permitted investment options, see the "Investment Options"
section.
We offer a benefit that guarantees until the later death of two natural
persons who are each other's spouses at the time of election of the benefit
and at the first death of one of them (the "designated lives", and each, a
"designated life") the ability to withdraw an annual amount (the "Annual
Income Amount") equal to a percentage of an initial principal value (the
"Protected Withdrawal Value") regardless of the impact of Sub-account
performance on the Account Value, subject to our rules regarding the timing
and amount of withdrawals. You are guaranteed to be able to withdraw the
Annual Income Amount for the lives of the designated lives ("Lifetime
Withdrawals") provided you have not made withdrawals of excess income that
have resulted in your Account Value being reduced to zero. We also permit a
one-time Non-Lifetime Withdrawal from your Annuity prior to taking Lifetime
Withdrawals under the benefit. The benefit may be appropriate if you intend to
make periodic withdrawals from your Annuity, wish to ensure that Sub-account
performance will not affect your ability to receive annual payments, and wish
either spouse to be able to continue the Spousal Highest Daily Lifetime 6 Plus
benefit after the death of the first spouse. You are not required to make
withdrawals as part of the benefit - the guarantees are not lost if you
withdraw less than the maximum allowable amount each year under the rules of
the benefit. An integral component of Spousal Highest Daily Lifetime 6 Plus is
the mathematical formula we employ that may periodically transfer your Account
Value to and from the AST Investment Grade Bond Sub-account. See the section
above entitled "How Highest Daily Lifetime 6 Plus Transfers Account Value
Between Your Permitted Sub-accounts and the AST Investment Grade Bond
Sub-account." Withdrawals are taken first from your own Account Value. We are
only required to begin making lifetime income payments to you under our
guarantee when and if your Account Value is reduced to zero (unless the
benefit has terminated).
Spousal Highest Daily Lifetime 6 Plus also provides for a Death Benefit
generally equal to three times your Annual Income Amount. The Death Benefit,
however, is not payable if your Account Value is reduced to zero as a result
of withdrawals or if annuity payments are being made at the time of the
decedent's death. See Death Benefit Component of Spousal Highest Daily
Lifetime 6 Plus, below.
ALTHOUGH YOU ARE GUARANTEED THE ABILITY TO WITHDRAW YOUR ANNUAL INCOME AMOUNT
FOR LIFE EVEN IF YOUR ACCOUNT VALUE FALLS TO ZERO, IF YOU TAKE WITHDRAWALS OF
EXCESS INCOME THAT BRING YOUR ACCOUNT VALUE TO ZERO, YOUR ANNUAL INCOME AMOUNT
WOULD ALSO FALL TO ZERO, AND THE BENEFIT WOULD TERMINATE. IN THAT SCENARIO, NO
FURTHER AMOUNT, INCLUDING THE DEATH BENEFIT DESCRIBED BELOW, WOULD BE PAYABLE
UNDER SPOUSAL HIGHEST DAILY LIFETIME 6 PLUS.
You may also participate in the 6 or 12 Month Dollar Cost Averaging Program if
you elect Spousal Highest Daily Lifetime 6 Plus for Annuities issued on or
after May 1, 2009, subject to the 6 or 12 Month DCA Program's rules, and
subject to State approvals. The 6 or 12 Month DCA Program is not available in
certain states.
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Currently, if you elect Spousal Highest Daily Lifetime 6 Plus and subsequently
terminate the benefit, you may elect another living benefit, subject to our
current rules. See "Election of and Designations under the Benefit" below and
"Termination of Existing Benefits and Election of New Benefits" for details.
Please note that if you terminate Spousal Highest Daily Lifetime 6 Plus and
elect another benefit, you lose the guarantees that you had accumulated under
your existing benefit and we will base any guarantees under the new benefit on
your Account Value as of the date the new benefit becomes active.
KEY FEATURE - PROTECTED WITHDRAWAL VALUE
The Protected Withdrawal Value is used to calculate the initial Annual Income
Amount. The Protected Withdrawal Value is separate from your Account Value and
not available as cash or a lump sum. On the effective date of the benefit, the
Protected Withdrawal Value is equal to your Account Value. On each Valuation
Day thereafter until the date of your first Lifetime Withdrawal (excluding any
Non-Lifetime Withdrawal discussed below), the Protected Withdrawal Value is
equal to the "Periodic Value" described in the next paragraph.
The "Periodic Value" initially is equal to the Account Value on the effective
date of the benefit. On each Valuation Day thereafter until the first Lifetime
Withdrawal, we recalculate the Periodic Value. We stop determining the
Periodic Value upon your first Lifetime Withdrawal after the effective date of
the benefit. On each Valuation Day (the "Current Valuation Day"), the Periodic
Value is equal to the greater of:
(1)the Periodic Value for the immediately preceding business day (the "Prior
Valuation Day") appreciated at the daily equivalent of 6% annually during
the calendar day(s) between the Prior Valuation Day and the Current
Valuation Day (i.e., one day for successive Valuation Days, but more than
one calendar day for Valuation Days that are separated by weekends and/or
holidays), plus the amount of any purchase payment made on the Current
Valuation Day (the Periodic Value is proportionally reduced for any
Non-Lifetime Withdrawal); and
(2)the Account Value on the current Valuation Day.
If you have not made a Lifetime Withdrawal on or before the 10/th/ or 20/th/
Anniversary of the effective date of the benefit, your Periodic Value on the
10/th/ or 20/th/ Anniversary of the benefit effective date is equal to the
greater of:
(1)the Periodic Value described above or,
(2)the sum of (a), (b) and (c) (proportionally reduced for any Non-Lifetime
Withdrawal):
(a)200% (on the 10/th/ anniversary) or 400% (on the 20/th/ anniversary) of
the Account Value on the effective date of the benefit including any
purchase payments made on that day;
(b)200% (on the 10/th/ anniversary) or 400% (on the 20/th/ anniversary) of
all purchase payments made within one year following the effective date
of the benefit; and
(c)all purchase payments made after one year following the effective date
of the benefit.
Once the first Lifetime Withdrawal is made, the Protected Withdrawal Value at
any time is equal to the greater of (i) the Protected Withdrawal Value on the
date of the first Lifetime Withdrawal, increased for subsequent purchase
payments and reduced for subsequent Lifetime Withdrawals, and (ii) the highest
daily Account Value upon any step-up, increased for subsequent purchase
payments and reduced for subsequent Lifetime Withdrawals (see below).
KEY FEATURE - ANNUAL INCOME AMOUNT UNDER THE SPOUSAL HIGHEST DAILY LIFETIME 6
PLUS BENEFIT
The Annual Income Amount is equal to a specified percentage of the Protected
Withdrawal Value at the first Lifetime Withdrawal and does not reduce in
subsequent Annuity Years, as described below. The percentage initially depends
on the age of the youngest designated life on the date of the first Lifetime
Withdrawal after election of the benefit. The percentages are: 4% for ages
50-64, 5% for ages 65-84, and 6% for ages 85 and older. We use the age of the
youngest designated life even if that designated life is no longer a
participant under the Annuity due to death or divorce. Under the Spousal
Highest Daily Lifetime 6 Plus benefit, if your cumulative Lifetime Withdrawals
in an Annuity Year are less than or equal to the Annual Income Amount, they
will not reduce your Annual Income Amount in subsequent Annuity Years, but any
such withdrawals will reduce the Annual Income Amount on a dollar-for-dollar
basis in that Annuity Year. If your cumulative Lifetime Withdrawals in an
Annuity Year are in excess of the Annual Income Amount for any Annuity Year
("Excess Income"), your Annual Income Amount in subsequent years will be
reduced (except with regard to required minimum distributions for this Annuity
that comply with our rules) by the result of the ratio of the Excess Income to
the Account Value immediately prior to such withdrawal (see examples of this
calculation below). If you take withdrawals of Excess Income, only the portion
of the Lifetime Withdrawal that exceeds the remaining Annual Income Amount
will proportionally reduce your Protected Withdrawal Value and Annual Income
Amount in future years. Reductions are based on the actual amount of the
withdrawal. Lifetime Withdrawals of any amount up to and including the Annual
Income Amount will reduce the Protected Withdrawal Value by the amount of the
withdrawal. Withdrawals of Excess Income will reduce the Protected Withdrawal
Value by the same ratio as the reduction to the Annual Income Amount.
You may use the Systematic Withdrawal program to make withdrawals of the
Annual Income Amount. Any systematic withdrawal will be deemed a Lifetime
Withdrawal under this benefit.
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Any Purchase Payment that you make subsequent to the election of Spousal
Highest Daily Lifetime 6 Plus and subsequent to the first Lifetime Withdrawal
will (i) increase the then-existing Annual Income Amount by an amount equal to
a percentage of the Purchase Payment based on the age of the younger
designated life at the time of the first Lifetime Withdrawal (the percentages
are: 4% for ages 50-64, 5% for ages 65-84, and 6% for ages 85 and older, and
(ii) increase the Protected Withdrawal Value by the amount of the Purchase
Payment.
If your Annuity permits additional purchase payments, we may limit any
additional purchase payment(s) if we determine that as a result of the timing
and amounts of your additional purchase payments and withdrawals, the Annual
Income Amount is being increased in an unintended fashion. Among the factors
we will use in making a determination as to whether an action is designed to
increase the Annual Income Amount in an unintended fashion is the relative
size of additional purchase payment(s). Subject to state law, we reserve the
right to not accept additional purchase payments if we are not then offering
this benefit for new elections. We will exercise such reservation of right for
all annuity purchasers in the same class in a nondiscriminatory manner.
HIGHEST DAILY AUTO STEP-UP
An automatic step-up feature ("Highest Daily Auto Step-Up") is part of this
benefit. As detailed in this paragraph, the Highest Daily Auto Step-Up feature
can result in a larger Annual Income Amount subsequent to your first Lifetime
Withdrawal. The Highest Daily Step-Up starts with the anniversary of the Issue
Date of the Annuity (the "Annuity Anniversary") immediately after your first
Lifetime Withdrawal under the benefit. Specifically, upon the first such
Annuity Anniversary, we identify the Account Value on each Valuation Day
within the immediately preceding Annuity Year after your first Lifetime
Withdrawal. Having identified the highest daily value (after all daily values
have been adjusted for subsequent purchase payments and withdrawals), we then
multiply that value by a percentage that varies based on the age of the
youngest designated life on the Annuity Anniversary as of which the step-up
would occur. The percentages are 4% for ages 50-64, 5% for ages 65-84, and 6%
for ages 85 and older. If that value exceeds the existing Annual Income
Amount, we replace the existing amount with the new, higher amount. Otherwise,
we leave the existing Annual Income Amount intact. The Account Value on the
Annuity Anniversary is considered the last daily step-up value of the Annuity
Year. In later years (i.e., after the first Annuity Anniversary after the
first Lifetime Withdrawal), we determine whether an automatic step-up should
occur on each Annuity Anniversary by performing a similar examination of the
Account Values that occurred on Valuation Days during the year. Taking
Lifetime Withdrawals could produce a greater difference between your Protected
Withdrawal Value and your Account Value, which may make a Highest Daily Auto
Step-up less likely to occur. At the time that we increase your Annual Income
Amount, we also increase your Protected Withdrawal Value to equal the highest
daily value upon which your step-up was based only if that results in an
increase to the Protected Withdrawal Value. Your Protected Withdrawal Value
will never be decreased as a result of an income step-up. If, on the date that
we implement a Highest Daily Auto Step-Up to your Annual Income Amount, the
charge for Spousal Highest Daily Lifetime 6 Plus has changed for new
purchasers, you may be subject to the new charge at the time of such step-up.
Prior to increasing your charge for Spousal Highest Daily Lifetime 6 Plus upon
a step-up, we would notify you, and give you the opportunity to cancel the
automatic step-up feature. If you receive notice of a proposed step-up and
accompanying fee increase, you should carefully evaluate whether the amount of
the step-up justifies the increased fee to which you will be subject.
If you are engaged in a Systematic Withdrawal program, we will not
automatically increase the withdrawal amount when there is an increase to the
Annual Income Amount.
The Spousal Highest Daily Lifetime 6 Plus benefit does not affect your ability
to take withdrawals under your Annuity, or limit your ability to take
withdrawals that exceed the Annual Income Amount. Under Spousal Highest Daily
Lifetime 6 Plus, if your cumulative Lifetime Withdrawals in an Annuity Year
are less than or equal to the Annual Income Amount, they will not reduce your
Annual Income Amount in subsequent Annuity Years, but any such withdrawals
will reduce the Annual Income Amount on a dollar-for-dollar basis in that
Annuity Year.
If, cumulatively, you withdraw an amount less than the Annual Income Amount in
any Annuity Year, you cannot carry-over the unused portion of the Annual
Income Amount to subsequent Annuity Years.
Because each of the Protected Withdrawal Value and Annual Income Amount is
determined in a way that is not solely related to Account Value, it is
possible for the Account Value to fall to zero, even though the Annual Income
Amount remains.
Examples of dollar-for-dollar and proportional reductions, and the Highest
Daily Auto Step-Up are set forth below. The values shown here are purely
hypothetical, and do not reflect the charges for the Spousal Highest Daily
Lifetime 6 Plus benefit or any other fees and charges under the Annuity.
Assume the following for all three examples:
. The Issue Date is December 1, 2008
. The Spousal Highest Daily Lifetime 6 Plus benefit is elected on
September 1, 2009
. The younger designated life was 70 years old when he/she elected the
Spousal Highest Daily Lifetime 6 Plus benefit.
EXAMPLE OF DOLLAR-FOR-DOLLAR REDUCTIONS.
On November 24, 2009, the Protected Withdrawal Value is $120,000, resulting in
an Annual Income Amount of $6,000 (since the youngest designated life is
between the ages of 65 and 84 at the time of the first Lifetime Withdrawal,
the Annual Income Amount is 5% of the Protected Withdrawal Value, in this case
5% of $120,000). Assuming $2,500 is withdrawn from the Annuity on this date,
the remaining Annual Income Amount for that Annuity Year (up to and including
December 1, 2009) is $3,500. This is the result of a dollar-for-dollar
reduction of the Annual Income Amount ($6,000 less $2,500 = $3,500).
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EXAMPLE OF PROPORTIONAL REDUCTIONS
Continuing the previous example, assume an additional withdrawal of $5,000
occurs on November 27, 2009 and the Account Value at the time and immediately
prior to this withdrawal is $118,000. The first $3,500 of this withdrawal
reduces the Annual Income Amount for that Annuity Year to $0. The remaining
withdrawal amount of $1,500 - reduces the Annual Income Amount in future
Annuity Years on a proportional basis based on the ratio of the excess
withdrawal to the Account Value immediately prior to the excess withdrawal.
(Note that if there were other withdrawals in that Annuity Year, each would
result in another proportional reduction to the Annual Income Amount).
HERE IS THE CALCULATION:
Account Value before Lifetime Withdrawal $118,000.00
Less amount of "non" excess withdrawal $ 3,500.00
Account Value immediately before excess withdrawal of $1,500 $114,500.00
Excess withdrawal amount $ 1,500.00
Divided by Account Value immediately before excess withdrawal $114,500.00
Ratio 1.31%
Annual Income Amount $ 6,000.00
Less ratio of 1.31% $ 78.60
Annual Income Amount for future Annuity Years $ 5,921.40
EXAMPLE OF HIGHEST DAILY AUTO STEP-UP
On each Annuity Anniversary date, the Annual Income Amount is stepped-up if
the appropriate percentage (based on the youngest designated life's age on the
Annuity Anniversary) of the highest daily value since your first Lifetime
Withdrawal (or last Annuity Anniversary in subsequent years), adjusted for
withdrawals and additional purchase payments, is higher than the Annual Income
Amount, adjusted for excess withdrawals and additional purchase payments.
Continuing the same example as above, the Annual Income Amount for this
Annuity Year is $6,000. However, the excess withdrawal on November 27 reduces
the amount to $5,921.40 for future years (see above). For the next Annuity
Year, the Annual Income Amount will be stepped up if 5% (since the youngest
designated life is between 65 and 84 on the date of the potential step-up) of
the highest daily Account Value adjusted for withdrawals and purchase
payments, is higher than $5921.40. Here are the calculations for determining
the daily values. Only the November 25 value is being adjusted for excess
withdrawals as the November 30 and December 1 Valuation Days occur after the
excess withdrawal on November 27.
HIGHEST DAILY VALUE
(ADJUSTED WITH ADJUSTED ANNUAL
WITHDRAWAL AND PURCHASE INCOME AMOUNT (5% OF THE
DATE* ACCOUNT VALUE PAYMENTS)** HIGHEST DAILY VALUE)
----- ------------- ----------------------- ------------------------
November 25, 2009 $119,000.00 $ 119,000.00 $5,950.00
November 26, 2009 Thanksgiving Day
November 27, 2009 $113,000.00 $ 113,986.95 $5,699.35
November 30, 2009 $113,000.00 $ 113,986.95 $5,699.35
December 01, 2009 $119,000.00 $ 119,000.00 $5,950.00
* In this example, the Annuity Anniversary date is December 1. The Valuation
Dates are every day following the first Lifetime Withdrawal. In subsequent
Annuity Years Valuation Dates will be every day following the Annuity
Anniversary. The Annuity Anniversary Date of December 1 is considered the
final Valuation Date for the Annuity Year.
** In this example, the first daily value after the first Lifetime Withdrawal
is $119,000 on November 25, resulting in an adjusted Annual Income Amount
of $5,950.00. This amount is adjusted on November 27 to reflect the $5,000
withdrawal. The calculations for the adjustments are:
. The Account Value of $119,000 on November 25 is first reduced
dollar-for-dollar by $3,500 ($3,500 is the remaining Annual Income
Amount for the Annuity Year), resulting in an adjusted Account Value of
$115,500 before the excess withdrawal.
. This amount ($115,500) is further reduced by 1.31% (this is the ratio in
the above example which is the excess withdrawal divided by the Account
Value immediately preceding the excess withdrawal) resulting in a
Highest Daily Value of $113,986.95.
. The adjusted Annual Income Amount is carried forward to the next
Valuation Date of November 30. At this time, we compare this amount to
5% of the Account Value on November 30. Since the November 27 adjusted
Annual Income Amount of $5,699.35 is higher than $5,650.00 (5% of
$113,000), we continue to carry $5,699.35 forward to the next and final
Valuation Date of December 1. The Account Value on December 1 is
$119,000 and 5% of this amount is $5,950. Since this is higher than
$5,699.35, the adjusted Annual Income Amount is reset to $5,950.00.
In this example, 5% of the December 1 value results in the highest amount of
$5,950.00. Since this amount is higher than the current year's Annual Income
Amount of $5,921.40 adjusted for excess withdrawals, the Annual Income Amount
for the next Annuity Year, starting on December 2, 2009 and continuing through
December 1, 2010, will be stepped-up to $5,950.00.
NON-LIFETIME WITHDRAWAL FEATURE
You may take a one-time non-lifetime withdrawal ("Non-Lifetime Withdrawal")
under Spousal Highest Daily Lifetime 6 Plus. It is an optional feature of the
benefit that you can only elect at the time of your first withdrawal. You
cannot take a Non-Lifetime Withdrawal in an amount that would cause your
Annuity's Account Value, after taking the withdrawal, to fall below the minimum
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Surrender Value (see "Access to Account Value - Can I Surrender My Annuity for
Its Value?"). This Non-Lifetime Withdrawal will not establish your initial
Annual Income Amount and the Periodic Value above will continue to be
calculated. However, the total amount of the withdrawal will proportionally
reduce all guarantees associated with the Spousal Highest Daily Lifetime 6
Plus benefit. You must tell us if your withdrawal is intended to be the
Non-Lifetime Withdrawal and not the first Lifetime Withdrawal under the
Spousal Highest Daily Lifetime 6 Plus benefit. If you don't elect the
Non-Lifetime Withdrawal, the first withdrawal you make will be the first
Lifetime Withdrawal that establishes your Protected Withdrawal Value and
Annual Income Amount. Once you elect the Non-Lifetime Withdrawal or Lifetime
Withdrawals, no additional Non-Lifetime Withdrawals may be taken.
The Non-Lifetime Withdrawal will proportionally reduce the Protected
Withdrawal Value; the Periodic Value guarantees on the tenth and twentieth
anniversaries of the benefit effective date (described above); and the Death
Benefit (described below). It will reduce all three by the percentage the
total withdrawal amount (including any applicable CDSC) represents of the then
current Account Value immediately prior to the time of the withdrawal.
If you are participating in a Systematic Withdrawal program, the first
withdrawal under the program cannot be classified as the Non-Lifetime
Withdrawal. The first partial withdrawal in payment of any third party
investment advisory service from your Annuity also cannot be classified as the
Non-Lifetime Withdrawal.
EXAMPLE - NON-LIFETIME WITHDRAWAL (PROPORTIONAL REDUCTION)
This example is purely hypothetical and does not reflect the charges for the
benefit or any other fees and charges under the Annuity. It is intended to
illustrate the proportional reduction of the Non-Lifetime Withdrawal under
this benefit.
Assume the following:
. The Issue Date is December 1, 2008
. The Spousal Highest Daily Lifetime 6 Plus benefit is elected on
September 1, 2009
. The Account Value at benefit election was $105,000
. The younger designated life was 70 years old when he/she elected the
Spousal Highest Daily Lifetime 6 Plus benefit
. No previous withdrawals have been taken under the Spousal Highest Daily
Lifetime 6 Plus benefit
On October 2, 2009, the Protected Withdrawal Value is $125,000, the 10th
benefit year minimum Periodic Value guarantee is $210,000 and the 20th benefit
year minimum Periodic Value guarantee is $420,000, and the Account Value is
$120,000. Assuming $15,000 is withdrawn from the Annuity on October 2, 2009
and is designated as a Non-Lifetime Withdrawal, all guarantees associated with
the Spousal Highest Daily Lifetime 6 Plus benefit will be reduced by the ratio
the total withdrawal amount represents of the Account Value just prior to the
withdrawal being taken.
HERE IS THE CALCULATION:
Withdrawal amount divided by $ 15,000
Account Value before withdrawal $120,000
Equals ratio 12.5%
All guarantees will be reduced by the above ratio (12.5%)
Protected Withdrawal Value $109,375
10th benefit year Minimum Periodic Value $183,750
20th benefit year Minimum Periodic Value $367,500
REQUIRED MINIMUM DISTRIBUTIONS
Withdrawals that exceed the Annual Income Amount, but which you are required
to take as a required minimum distribution for this Annuity, will not reduce
the Annual Income Amount for future years. No additional Annual Income Amounts
will be available in an Annuity Year due to required minimum distributions
unless the required minimum distribution amount is greater than the Annual
Income Amount. Unless designated as a Non-Lifetime Withdrawal, required
minimum distributions are considered Lifetime Withdrawals. If you take a
withdrawal in an Annuity Year in which your required minimum distribution for
that year is not greater than the Annual Income Amount, and the amount of the
withdrawal exceeds the Annual Income Amount for that year, we will treat the
withdrawal as a withdrawal of Excess Income. Such a withdrawal of Excess
Income will reduce the Annual Income Amount available in future years. If the
required minimum distribution (as calculated by us for your Annuity and not
previously withdrawn in the current calendar year) is greater than the Annual
Income Amount, an amount equal to the remaining Annual Income Amount plus the
difference between the required minimum distribution amount not previously
withdrawn in the current calendar year and the Annual Income Amount will be
available in the current Annuity Year without it being considered a withdrawal
of Excess Income. In the event that a required minimum distribution is
calculated in a calendar year that crosses more than one Annuity Year and you
choose to satisfy the entire required minimum distribution for that calendar
year in the next Annuity Year, the distribution taken in the next Annuity Year
will reduce your Annual Income Amount in that Annuity Year on a dollar for
dollar basis. If the required minimum distribution not taken in the prior
Annuity Year is greater than the Annual Income Amount as guaranteed by the
benefit in the current Annuity Year, the total required minimum distribution
amount may be taken without being treated as a withdrawal of Excess Income.
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In any year in which the requirement to take required minimum distributions is
suspended by law, we reserve the right, in our sole discretion and regardless
of any position taken on this issue in a prior year, to treat any amount that
would have been considered as a required minimum distribution if not for the
suspension as eligible for treatment as described herein.
EXAMPLE - REQUIRED MINIMUM DISTRIBUTIONS
The following example is purely hypothetical and is intended to illustrate a
scenario in which the required minimum distribution amount in a given Annuity
Year is greater than the Annual Income Amount.
Annual Income Amount = $5,000
Remaining Annual Income Amount = $3,000
Required Minimum Distribution = $6,000
The amount you may withdraw in the current Annuity Year without it being
treated as an Excess Withdrawal is $4,000. ($3,000 + ($6,000 - $5,000) =
$4,000).
If the $4,000 withdrawal is taken, the remaining Annual Income Amount will be
zero and the remaining required minimum distribution amount of $2,000 may be
taken in the subsequent Annuity Year (when your Annual Income Amount is reset
to $5,000) without proportionally reducing all guarantees associated with the
Spousal Highest Daily Lifetime 6 Plus benefit as described above. The amount
you may withdraw in the subsequent Annuity Year if you stop taking withdrawals
in the current Annuity Year and choose not to satisfy the required minimum
distribution in the current Annuity Year (assuming the Annual Income Amount in
the subsequent Annuity Year is $5,000) without being treated as a withdrawal
of Excess Income is $6,000. This withdrawal must comply with all IRS
guidelines in order to satisfy the required minimum distribution for the
current calendar year.
DEATH BENEFIT COMPONENT OF SPOUSAL HIGHEST DAILY LIFETIME 6 PLUS.
If you elect Spousal Highest Daily Lifetime 6 Plus, we include a death benefit
(Death Benefit), at no additional cost, that is linked to the Annual Income
Amount under the benefit. If a death benefit is triggered and you currently
own Spousal Highest Daily Lifetime 6 Plus benefit, then your Death Benefit
will be equal to the greatest of:
.. the basic death benefit under the Annuity; and
.. the amount of any optional death benefit you may have elected and remains
in effect; and
.. a) if no Lifetime Withdrawal had been taken prior to death, 300% of the
Annual Income Amount that would have been determined on the date of death
if a Lifetime Withdrawal had occurred on that date or (b) if a Lifetime
Withdrawal had been taken prior to death, 300% of the Annual Income Amount
as of our receipt of due proof of death.
Upon the death of the first of the spousal designated lives, if a Death
Benefit, as described above, would otherwise be payable, and the surviving
designated life chooses to continue the Annuity, the Account Value will be
adjusted, as of the date we receive due proof of death, to equal the amount of
that Death Benefit if paid out in a lump sum, and the Spousal Highest Daily
Lifetime 6 Plus benefit remains in force. Upon the death of the second Spousal
designated life, the Death Benefit described above will be payable and the
Spousal Highest Daily Lifetime 6 Plus rider will terminate as of the date we
receive due proof of death.
PLEASE NOTE THAT THE DEATH BENEFIT UNDER SPOUSAL HIGHEST DAILY LIFETIME 6 PLUS
IS NOT PAYABLE IF YOUR ACCOUNT VALUE IS REDUCED TO ZERO AS A RESULT OF
WITHDRAWALS OR IF ANNUITY PAYMENTS ARE BEING MADE AT THE TIME OF THE
DECEDENT'S DEATH. THIS DEATH BENEFIT MAY NOT BE AVAILABLE IN ALL STATES.
BENEFITS UNDER SPOUSAL HIGHEST DAILY LIFETIME 6 PLUS
.. To the extent that your Account Value was reduced to zero as a result of
cumulative Lifetime Withdrawals in an Annuity Year that are less than or
equal to the Annual Income Amount, and amounts are still payable under
Spousal Highest Daily Lifetime 6 Plus, we will make an additional payment,
if any, for that Annuity Year equal to the remaining Annual Income Amount
for the Annuity Year. Thus, in that scenario, the remaining Annual Income
Amount would be payable even though your Account Value was reduced to zero.
In subsequent Annuity Years we make payments that equal the Annual Income
Amount as described in this section. We will make payments until the death
of the first of the designated lives to die, and will continue to make
payments until the death of the second designated life as long as the
designated lives were spouses at the time of the first death. If this were
to occur, you are not permitted to make additional purchase payments to
your Annuity. To the extent that cumulative withdrawals in the Annuity Year
that reduced your Account Value to zero are more than the Annual Income
Amount, the Spousal Highest Daily Lifetime 6 Plus benefit terminates, and
no additional payments will be made. However, if a withdrawal in the latter
scenario was taken to satisfy a required minimum distribution (as described
above) under the Annuity then the benefit will not terminate, and we will
continue to pay the Annual Income Amount in subsequent Annuity Years until
the death of the second designated life provided the designated lives were
spouses at the death of the first designated life. Please note that if your
Account Value is reduced to zero as a result of withdrawals, the Death
Benefit (described above) will also be reduced to zero and the Death
Benefit will not be payable.
.. Please note that if your Account Value is reduced to zero, all subsequent
payments will be treated as annuity payments. Further, payments that we
make under this benefit after the first day of the calendar month
coinciding with or next following the annuitant's 95/th/ birthday will be
treated as annuity payments.
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.. If annuity payments are to begin under the terms of your Annuity, or if you
decide to begin receiving annuity payments and there is an Annual Income
Amount due in subsequent Annuity Years, you can elect one of the following
two options:
(1)apply your Account Value to any annuity option available; or
(2)request that, as of the date annuity payments are to begin, we make
annuity payments each year equal to the Annual Income Amount. We will
make payments until the first of the designated lives to die, and
will continue to make payments until the death of the second
designated life as long as the designated lives were spouses at the
time of the first death. If, due to death of a designated life or
divorce prior to annuitization, only a single designated life
remains, then annuity payments will be made as a life annuity for the
lifetime of the designated life. We must receive your request in a
form acceptable to us at our office.
.. In the absence of an election when mandatory annuity payments are to begin,
we will make annual annuity payments as a joint and survivor or single (as
applicable) life fixed annuity with ten payments certain, by applying the
greater of the annuity rates then currently available or the annuity rates
guaranteed in your Annuity. The amount that will be applied to provide such
annuity payments will be the greater of:
(1)the present value of the future Annual Income Amount payments. Such
present value will be calculated using the greater of the joint and
survivor or single (as applicable) life fixed annuity rates then
currently available or the joint and survivor or single (as
applicable) life fixed annuity rates guaranteed in your Annuity; and
(2)the Account Value.
If no Lifetime Withdrawal was ever taken, we will calculate the Annual Income
Amount as if you made your first Lifetime Withdrawal on the date the annuity
payments are to begin.
PLEASE NOTE THAT THE DEATH BENEFIT (DESCRIBED ABOVE) IS NOT PAYABLE IF ANNUITY
PAYMENTS ARE BEING MADE AT THE TIME OF THE DECEDENT'S DEATH.
OTHER IMPORTANT CONSIDERATIONS
.. Withdrawals under the Spousal Highest Daily Lifetime 6 Plus benefit are
subject to all of the terms and conditions of the Annuity, as well as
withdrawals that exceed the Annual Income Amount. If you have an active
Systematic Withdrawal program running at the time you elect this benefit,
the first Systematic Withdrawal that processes after your election of the
benefit will be deemed a Lifetime Withdrawal.
.. Withdrawals made while the Spousal Highest Daily Lifetime 6 Plus benefit is
in effect will be treated, for tax purposes, in the same way as any other
withdrawals under the Annuity. Any withdrawals made under the benefit will
be taken pro-rata from the Sub-accounts (including the AST Investment Grade
Bond Sub-account) and the DCA Fixed Rate Options (if you are participating
in the 6 or 12 Month DCA Program). Withdrawals from the DCA Fixed Rate
Options will be taken on a last-in, first-out basis. As discussed in the
prospectus, you may participate in the 6 or 12 Month Dollar Cost Averaging
Program only if your Annuity was issued on or after May 1, 2009.
.. You can make withdrawals from your Annuity while your Account Value is
greater than zero without purchasing the Spousal Highest Daily Lifetime 6
Plus benefit. The Spousal Highest Daily Lifetime 6 Plus benefit provides a
guarantee that if your Account Value is reduced to zero (subject to program
rules regarding the timing and amount of withdrawals), you will be able to
receive your Annual Income Amount in the form of withdrawals.
.. You cannot allocate purchase payments or transfer Account Value to or from
the AST Investment Grade Bond Sub-account. A summary description of the AST
Investment Grade Bond Portfolio appears in the prospectus section entitled
"What Are The Investment Objectives and Policies of The Portfolios?". You
can find a copy of the AST Investment Grade Bond Portfolio prospectus by
going to www.prudentialannuities.com
.. You should carefully consider when to begin taking withdrawals. If you
begin taking withdrawals early, you may maximize the time during which you
may take withdrawals due to longer life expectancy, and you will be using
an optional benefit for which you are paying a charge. On the other hand,
you could limit the value of the benefit if you begin taking withdrawals
too soon. For example, withdrawals reduce your Account Value and may limit
the potential for increasing your Protected Withdrawal Value. You should
discuss with your Financial Professional when it may be appropriate for you
to begin taking withdrawals.
.. You can make withdrawals from your Annuity without purchasing the Spousal
Highest Daily Lifetime 6 Plus benefit. The Spousal Highest Daily Lifetime 6
Plus benefit provides a guarantee that if your Account Value declines due
to Sub-account performance, you will be able to receive your Annual Income
Amount in the form of periodic benefit payments.
.. Transfers to and from the elected Sub-accounts, the DCA Fixed Rate Options,
and the AST Investment Grade Bond Sub-account triggered by the Spousal
Highest Daily Lifetime 6 Plus mathematical formula will not count toward
the maximum number of free transfers allowable under an Annuity.
.. Upon inception of the benefit and to maintain the benefit, 100% of your
Account Value must be allocated to the Permitted Sub-accounts (or any DCA
Fixed Rate Options if you elect the 6 or 12 Month DCA Program). If,
subsequent to your election of the benefit, we change our requirements for
how Account Value must be allocated under the benefit, the new requirement
will apply only to new elections of the benefit, and we will not compel you
to reallocate your Account Value in accordance with our newly adopted
requirements. However, you may be required to reallocate due to the merger
of a Portfolio or the closing of a Portfolio. At the time of any change in
requirements, and as applicable only to new elections of the benefit,
transfers of Account Value and allocation of additional purchase payments
may be subject to new investment limitations.
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.. If you elect this benefit and in connection with that election, you are
required to reallocate to different Sub-accounts, then on the Valuation Day
we receive your request in good order, we will (i) sell units of the
non-permitted investment options and (ii) invest the proceeds of those
sales in the Sub-accounts that you have designated. During this
reallocation process, your Account Value allocated to the Sub-accounts will
remain exposed to investment risk, as is the case generally. The
newly-elected benefit will commence at the close of business on the
following Valuation Day. Thus, the protection afforded by the newly-elected
benefit will not arise until the close of business on the following
Valuation Day.
.. The Basic Death Benefit will terminate if withdrawals taken under Spousal
Highest Daily Lifetime 6 Plus cause your Account Value to reduce to zero.
Certain optional Death Benefits may terminate if withdrawals taken under
Spousal Highest Daily Lifetime 6 Plus cause your Account Value to reduce to
zero. (See "Death Benefit" for more information.)
.. The maximum charge for Spousal Highest Daily Lifetime 6 Plus is 1.50%
annually of the greater of the Account Value and Protected Withdrawal
Value. The current charge is 0.95% annually of the greater of Account Value
and Protected Withdrawal Value. We deduct this charge on quarterly
anniversaries of the benefit effective date. Thus, we deduct, on a
quarterly basis, 0.2375% of the greater of the prior Valuation Day's
Account Value, or the prior Valuation Day's Protected Withdrawal Value. We
deduct the fee pro rata from each of your Sub-accounts, including the AST
Investment Grade Bond Sub-account, and the DCA Fixed Rate Options (if
applicable). Since this fee is based on the greater of the Account Value
and Protected Withdrawal Value, the fee for Spousal Highest Daily Lifetime
6 Plus may be greater than it would have been, had it been based on the
Account Value alone. You will begin paying the charge for this benefit as
of the effective date of the benefit, even if you do not begin taking
withdrawals for many years, or ever. We will not refund the charges you
have paid if you choose never to take any withdrawals and/or if you never
receive any lifetime income payments. The following example is hypothetical
and is for illustrative purposes only.
Assuming a benefit effective date of September 1, 2009 (which means that
quarterly benefit anniversaries are: December 1, March 1, June 1, and
September 1). Assume the Protected Withdrawal Value as of November 30, 2009
(prior Valuation Day's Protected Withdrawal Value) = $200,000.00 and the
Account Value as of November 30, 2009 (prior Valuation Day's Account Value) =
$195,000.00. The first benefit charge date would be December 1, 2009 and the
benefit charge amount would be $475.00 ($200,000 X .2375%)
If the deduction of the charge would result in the Account Value falling below
the lesser of $500 or 5% of the sum of the Account Value on the effective date
of the benefit plus all purchase payments made subsequent thereto (we refer to
this as the "Account Value Floor"), we will only deduct that portion of the
charge that would not cause the Account Value to fall below the Account Value
Floor. If the entire Account Value is less than the Account Value Floor when
we would deduct a charge for the benefit, then no charge will be assessed for
that benefit quarter. If a charge for the Spousal Highest Daily Lifetime 6
Plus benefit would be deducted on the same day we process a withdrawal
request, the charge will be deducted first, then the withdrawal will be
processed. The withdrawal could cause the Account Value to fall below the
Account Value Floor. While the deduction of the charge (other than the final
charge) may not reduce the Account Value to zero, withdrawals may reduce the
Account Value to zero. If this happens and the Annual Income Amount is greater
than zero, we will make payments under the benefit and the Death Benefit
(described above) will not be payable.
ELECTION OF AND DESIGNATIONS UNDER THE BENEFIT
Spousal Highest Daily Lifetime 6 Plus can only be elected based on two
designated lives. Designated lives must be natural persons who are each
other's spouses at the time of election of the benefit and at the death of the
first of the designated lives to die. Currently, Spousal Highest Daily
Lifetime 6 Plus only may be elected where the Owner, Annuitant, and
Beneficiary designations are as follows:
.. One Annuity Owner, where the Annuitant and the Owner are the same person
and the beneficiary is the Owner's spouse. The youngest Owner/Annuitant and
the beneficiary must be at least 50 years old and the oldest must be at
least 55 years old at the time of election; or
.. Co-Annuity Owners, where the Owners are each other's spouses. The
beneficiary designation must be the surviving spouse, or the spouses named
equally. One of the owners must be the Annuitant. The youngest Owner must
be at least 50 years old and the oldest owner must be at least 55 years old
at the time of election; or
.. One Annuity Owner, where the Owner is a custodial account established to
hold retirement assets for the benefit of the Annuitant pursuant to the
provisions of Section 408(a) of the Internal Revenue Code (or any successor
Code section thereto) ("Custodial Account"), the beneficiary is the
Custodial Account, and the spouse of the Annuitant is the Contingent
Annuitant. The youngest of the Annuitant and the Contingent Annuitant must
be at least 50 years old and the oldest must be at least 55 years old at
the time of election.
We do not permit a change of Owner under this benefit, except as follows:
(a)if one Owner dies and the surviving spousal Owner assumes the Annuity, or
(b)if the Annuity initially is co-owned, but thereafter the Owner who is not
the Annuitant is removed as Owner. We permit changes of beneficiary under
this benefit. If the designated lives divorce, the Spousal Highest Daily
Lifetime 6 Plus benefit may not be divided as part of the divorce
settlement or judgment. Nor may the divorcing spouse who retains ownership
of the Annuity appoint a new designated life upon re-marriage.
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Spousal Highest Daily Lifetime 6 Plus can be elected at the time that you
purchase your Annuity or after the Issue Date, subject to availability, and
our eligibility rules and restrictions. If you elect Spousal Highest Daily
Lifetime 6 Plus and terminate it, you can re-elect it, subject to our current
rules and availability. Additionally, if you currently own an Annuity with a
living benefit that is terminable, you may terminate your existing benefit
rider and elect any available benefits subject to our current rules. See
"Termination of Existing Benefits and Election of New Benefits" in the
prospectus for information pertaining to elections, termination and
re-election of benefits. PLEASE NOTE THAT IF YOU TERMINATE A LIVING BENEFIT
AND ELECT A NEW LIVING BENEFIT, YOU LOSE THE GUARANTEES THAT YOU HAD
ACCUMULATED UNDER YOUR EXISTING BENEFIT AND WE WILL BASE ANY GUARANTEES UNDER
THE NEW BENEFIT ON YOUR ACCOUNT VALUE AS OF THE DATE THE NEW BENEFIT BECOMES
ACTIVE. You and your financial professional should carefully consider whether
terminating your existing benefit and electing a new benefit is appropriate
for you. We reserve the right to waive, change and/or further limit the
election frequency in the future.
TERMINATION OF THE BENEFIT
You may terminate the benefit at any time by notifying us. If you terminate
the benefit, any guarantee provided by the benefit will terminate as of the
date the termination is effective, and certain restrictions on re-election may
apply. The benefit automatically terminates: (i) if upon the death of the
first designated life, the surviving designated life opts to take the death
benefit under the Annuity (thus, the benefit does not terminate solely because
of the death of the first designated life), (ii) upon the death of the second
designated life (except as may be needed to pay the Death Benefit associated
with this benefit), (iii) upon your termination of the benefit, (iv) upon your
surrender of the Annuity, (v) upon your election to begin receiving annuity
payments (although if you have elected to take annuity payments in the form of
the Annual Income Amount, we will continue to pay the Annual Income Amount),
(vi) if both the Account Value and Annual Income Amount equal zero, or
(vii) if you cease to meet our requirements as described in "Election of and
Designations under the Benefit".
Upon termination of Spousal Highest Daily Lifetime 6 Plus other than upon
death of a designated life or annuitization, we impose any accrued fee for the
benefit (i.e., the fee for the pro-rated portion of the year since the fee was
last assessed), and thereafter we cease deducting the charge for the benefit.
This final charge will be deducted even if it results in the Account Value
falling below the Account Value Floor. With regard to your investment
allocations, upon termination we will: (i) leave intact amounts that are held
in the Permitted Sub-accounts (including any amounts in the DCA Fixed Rate
Options), and (ii) unless you are participating in an asset allocation program
(i.e., Custom Portfolios Program (we may have referred to the "Custom
Portfolios Program" as the "Optional Allocation and Rebalancing Program" in
other materials), Automatic Rebalancing Program, or 6 or 12 Month DCA Program)
for which we are providing administrative support, transfer all amounts held
in the AST Investment Grade Bond Portfolio Sub-account to your variable
investment options, pro rata (i.e. in the same proportion as the current
balances in your variable investment options). If prior to the transfer from
the AST Investment Grade Bond Sub-account the Account Value in the variable
investment options is zero, we will transfer such amounts according to your
most recent allocation instructions.
HOW SPOUSAL HIGHEST DAILY LIFETIME 6 PLUS TRANSFERS ACCOUNT VALUE BETWEEN YOUR
PERMITTED SUB-ACCOUNTS AND THE AST INVESTMENT GRADE BOND SUB-ACCOUNT. See "How
Highest Daily Lifetime 6 Plus Transfers Account Value Between Your Permitted
Sub-accounts and the AST Investment Grade Bond Sub-account" above for
information regarding this component of the benefit.
ADDITIONAL TAX CONSIDERATIONS
If you purchase an annuity as an investment vehicle for "qualified"
investments, including an IRA, SEP-IRA, Tax Sheltered Annuity (or 403(b)) or
employer plan under Code Section 401(a), the required minimum distribution
rules under the Code provide that you begin receiving periodic amounts from
your annuity beginning after age 70 1/2. For a Tax Sheltered Annuity or a
401(a) plan for which the participant is not a greater than five (5) percent
owner of the employer, this required beginning date can generally be deferred
to retirement, if later. Roth IRAs are not subject to these rules during the
owner's lifetime. The amount required under the Code may exceed the Annual
Income Amount, which will cause us to increase the Annual Income Amount in any
Annuity Year that required minimum distributions due from your Annuity are
greater than such amounts. In addition, the amount and duration of payments
under the annuity payment and death benefit provisions may be adjusted so that
the payments do not trigger any penalty or excise taxes due to tax
considerations such as required minimum distribution provisions under the
tax law.
As indicated, withdrawals made while this benefit is in effect will be
treated, for tax purposes, in the same way as any other withdrawals under the
Annuity. Please see the Tax Considerations section for a detailed discussion
of the tax treatment of withdrawals. We do not address each potential tax
scenario that could arise with respect to this benefit here. However, we do
note that if you participate in Spousal Highest Daily Lifetime 6 Plus through
a non-qualified annuity, as with all withdrawals, once all purchase payments
are returned under the Annuity, all subsequent withdrawal amounts will be
taxed as ordinary income.
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DEATH BENEFIT
WHAT TRIGGERS THE PAYMENT OF A DEATH BENEFIT?
The Annuity provides a Death Benefit during its accumulation period. IF THE
ANNUITY IS OWNED BY ONE OR MORE NATURAL PERSONS, THE DEATH BENEFIT IS PAYABLE
UPON THE FIRST DEATH OF AN OWNER. IF THE ANNUITY IS OWNED BY AN ENTITY, THE
DEATH BENEFIT IS PAYABLE UPON THE ANNUITANT'S DEATH, IF THERE IS NO CONTINGENT
ANNUITANT. Please note that if your Annuity is held as a Beneficiary Annuity
and owned by one of the permissible entities, no death benefit will be payable
since the Annuity will continue distributing the required distributions over
the life expectancy of the Key Life until either the Account Value is depleted
or the Annuity is fully surrendered. Generally, if a Contingent Annuitant was
designated before the Annuitant's death and the Annuitant dies, then the
Contingent Annuitant becomes the Annuitant and a Death Benefit will not be
paid at that time. The person upon whose death the Death Benefit is paid is
referred to below as the "decedent."
BASIC DEATH BENEFIT
The Annuity provides a basic Death Benefit at no additional charge. The
Insurance Charge we deduct daily from your Account Value allocated to the
Sub-accounts is used, in part, to pay us for the risk we assume in providing
the basic Death Benefit guarantee under the Annuity. The Annuity also offers
two different optional Death Benefits that can be purchased for an additional
charge. The additional charge is deducted to compensate Prudential Annuities
for providing increased insurance protection under the optional Death
Benefits. NOTWITHSTANDING THE ADDITIONAL PROTECTION PROVIDED UNDER THE
OPTIONAL DEATH BENEFITS, THE ADDITIONAL COST HAS THE IMPACT OF REDUCING THE
NET PERFORMANCE OF THE INVESTMENT OPTIONS. Also, no basic Death Benefit will
be paid if your Annuity terminates because your Account Value reaches zero
(which can happen if, for example, you are taking withdrawals under an
optional living benefit).
The basic Death Benefit depends on the decedent's age on the date of death:
If death occurs before the decedent's age 85, the The Death Benefit is the
greater of:
.. The sum of all Purchase Payments less the sum of all withdrawals; and
.. The sum of your Account Value in the Sub-accounts, your Interim Value in
the Fixed Allocations, and any Account Value in the Benefit Fixed Rate
Account or the DCA Fixed Rate Options.
If death occurs when the decedent is age 85 or older: The Death Benefit is
your Account Value.
CONSIDERATIONS FOR CONTINGENT ANNUITANTS: We may allow the naming of a
contingent annuitant when a Nonqualified Annuity contract is held by a pension
plan or a tax favored retirement plan or held by a Custodial Account (as
defined earlier in this prospectus). In such a situation, the Annuity may no
longer qualify for tax deferral where the Annuity contract continues after the
death of the Annuitant. In some of our Annuities held by these same types of
entities we allow for the naming of a co-annuitant, which also is used to mean
the successor annuitant (and not another life used for measuring the duration
of an annuity payment option). Like in the case of a contingent annuitant, the
Annuity may no longer qualify for tax deferral where the contract continues
after the death of the Annuitant. However, tax deferral should be provided
instead by the pension plan, tax favored retirement plan, or Custodial
Account. We may also allow the naming of a contingent annuitant when a
Nonqualified Annuity contract is held by an entity which is not eligible for
tax deferral benefits under Section 72(u) of the Code. This does not supersede
any benefit language which may restrict the use of the contingent annuitant.
OPTIONAL DEATH BENEFITS
Two optional Death Benefits are offered for purchase with your Annuity to
provide an enhanced level of protection for your beneficiaries. No optional
Death Benefit is available if your Annuity is held as a Beneficiary Annuity.
We reserve the right to cease offering any optional death benefit.
CURRENTLY, THESE BENEFITS ARE ONLY OFFERED IN THOSE JURISDICTIONS WHERE WE
HAVE RECEIVED REGULATORY APPROVAL AND MUST BE ELECTED AT THE TIME THAT YOU
PURCHASE YOUR ANNUITY. WE MAY, AT A LATER DATE, ALLOW EXISTING ANNUITY OWNERS
TO PURCHASE AN OPTIONAL DEATH BENEFIT SUBJECT TO OUR RULES AND ANY CHANGES OR
RESTRICTIONS IN THE BENEFITS. CERTAIN TERMS AND CONDITIONS MAY DIFFER BETWEEN
JURISDICTIONS ONCE APPROVED AND IF YOU PURCHASE YOUR ANNUITY AS PART OF AN
EXCHANGE, REPLACEMENT OR TRANSFER, IN WHOLE OR IN PART, FROM ANY OTHER ANNUITY
WE ISSUE. THE "COMBINATION 5% ROLL-UP AND HIGHEST ANNIVERSARY VALUE" DEATH
BENEFIT MAY ONLY BE ELECTED INDIVIDUALLY, AND CANNOT BE ELECTED IN COMBINATION
WITH ANY OTHER OPTIONAL DEATH BENEFIT. IF YOU ELECT SPOUSAL LIFETIME FIVE,
SPOUSAL HIGHEST DAILY LIFETIME SEVEN, SPOUSAL HIGHEST DAILY LIFETIME 7 PLUS OR
THE BIO FEATURE OF THE HIGHEST DAILY LIFETIME SEVEN OR THE HIGHEST DAILY
LIFETIME 7 PLUS SUITE OF BENEFITS, YOU ARE NOT PERMITTED TO ELECT AN OPTIONAL
DEATH BENEFIT.
INVESTMENT RESTRICTIONS MAY APPLY IF YOU ELECT CERTAIN OPTIONAL DEATH
BENEFITS. SEE THE CHART IN THE "INVESTMENT OPTIONS" SECTION OF THE PROSPECTUS
FOR A LIST OF INVESTMENT OPTIONS AVAILABLE AND PERMITTED WITH EACH BENEFIT.
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ENHANCED BENEFICIARY PROTECTION OPTIONAL DEATH BENEFIT
THE ENHANCED BENEFICIARY PROTECTION OPTIONAL DEATH BENEFIT IS NO LONGER
AVAILABLE FOR NEW ELECTIONS. IT PROVIDES ADDITIONAL AMOUNTS TO YOUR
BENEFICIARY THAT MAY BE USED TO OFFSET FEDERAL AND STATE TAXES PAYABLE ON ANY
TAXABLE GAINS IN YOUR ANNUITY AT THE TIME OF YOUR DEATH. WHETHER THIS BENEFIT
IS APPROPRIATE FOR YOU MAY DEPEND ON YOUR PARTICULAR CIRCUMSTANCES, INCLUDING
OTHER FINANCIAL RESOURCES THAT MAY BE AVAILABLE TO YOUR BENEFICIARY TO PAY
TAXES ON YOUR ANNUITY SHOULD YOU DIE DURING THE ACCUMULATION PERIOD. NO
BENEFIT IS PAYABLE IF DEATH OCCURS ON OR AFTER THE ANNUITY DATE.
THE ENHANCED BENEFICIARY PROTECTION OPTIONAL DEATH BENEFIT PROVIDED A BENEFIT
PAYABLE IN ADDITION TO THE BASIC DEATH BENEFIT AND CERTAIN OTHER OPTIONAL
DEATH BENEFITS YOU MAY ELECT IN CONJUNCTION WITH THIS BENEFIT. IF THE ANNUITY
HAS ONE OWNER, THE OWNER HAD TO BE AGE 75 OR LESS AT THE TIME THE BENEFIT WAS
PURCHASED. IF THE ANNUITY HAS JOINT OWNERS, THE OLDEST OWNER HAD TO BE AGE 75
OR LESS. IF THE ANNUITY IS OWNED BY AN ENTITY, THE ANNUITANT HAD TO BE AGE 75
OR LESS.
CALCULATION OF ENHANCED BENEFICIARY PROTECTION OPTIONAL DEATH BENEFIT
If you purchased the Enhanced Beneficiary Protection Optional Death Benefit,
the Death Benefit is calculated as follows:
1. the BASIC DEATH BENEFIT described above;
PLUS
2. 40% of your "GROWTH" under the Annuity, as defined below.
"GROWTH" means the sum of your Account Value in the Sub-accounts and your
Interim Value in the MVA Fixed Allocations, minus the total of all Purchase
Payments reduced by the sum of all proportional withdrawals.
"PROPORTIONAL WITHDRAWALS" are determined by calculating the percentage of
your Account Value that each prior withdrawal represented when withdrawn. For
example, a withdrawal of 50% of Account Value would be considered as a 50%
reduction in Purchase Payments.
THE ENHANCED BENEFICIARY PROTECTION OPTIONAL DEATH BENEFIT IS SUBJECT TO A
MAXIMUM OF 100% OF ALL PURCHASE PAYMENTS APPLIED TO THE ANNUITY AT LEAST 12
MONTHS PRIOR TO THE DEATH OF THE DECEDENT THAT TRIGGERS THE PAYMENT OF THE
DEATH BENEFIT.
THE ENHANCED BENEFICIARY PROTECTION OPTIONAL DEATH BENEFIT DESCRIBED ABOVE WAS
OFFERED IN THOSE JURISDICTIONS WHERE WE RECEIVED REGULATORY APPROVAL. CERTAIN
TERMS AND CONDITIONS MAY DIFFER BETWEEN JURISDICTIONS. PLEASE SEE APPENDIX F
FOR A DESCRIPTION OF THE ENHANCED BENEFICIARY PROTECTION OPTIONAL DEATH
BENEFIT OFFERED BEFORE NOVEMBER 18, 2002 IN THOSE JURISDICTIONS WHERE WE
RECEIVED REGULATORY APPROVAL. PLEASE REFER TO THE SECTION ENTITLED "TAX
CONSIDERATIONS" FOR A DISCUSSION OF SPECIAL TAX CONSIDERATIONS FOR PURCHASERS
OF THIS BENEFIT. THE ENHANCED BENEFICIARY PROTECTION DEATH BENEFIT WAS NOT
AVAILABLE IF YOU ELECTED THE "COMBINATION 5% ROLL-UP AND HIGHEST ANNIVERSARY
VALUE" DEATH BENEFIT, THE SPOUSAL LIFETIME FIVE INCOME BENEFIT, SPOUSAL
HIGHEST DAILY LIFETIME SEVEN OR HIGHEST DAILY LIFETIME SEVEN WITH BIO BENEFITS.
See Appendix B for examples of how the Enhanced Beneficiary Protection
Optional Death Benefit is calculated.
HIGHEST ANNIVERSARY VALUE DEATH BENEFIT ("HAV")
IF THE ANNUITY HAS ONE OWNER, THE OWNER MUST BE AGE 79 OR LESS AT THE TIME THE
HIGHEST ANNIVERSARY VALUE OPTIONAL DEATH BENEFIT IS PURCHASED. IF THE ANNUITY
HAS JOINT OWNERS, THE OLDEST OWNER MUST BE AGE 79 OR LESS. IF THE ANNUITY IS
OWNED BY AN ENTITY, THE ANNUITANT MUST BE AGE 79 OR LESS.
CERTAIN OF THE PORTFOLIOS OFFERED AS SUB-ACCOUNTS UNDER THE ANNUITY ARE NOT
AVAILABLE IF YOU ELECT THE HIGHEST ANNIVERSARY VALUE DEATH BENEFIT. IN
ADDITION, WE RESERVE THE RIGHT TO REQUIRE YOU TO USE CERTAIN ASSET ALLOCATION
MODEL(S) IF YOU ELECT THIS DEATH BENEFIT.
CALCULATION OF HIGHEST ANNIVERSARY VALUE DEATH BENEFIT
The HAV Death Benefit depends on whether death occurs before or after the
Death Benefit Target Date.
If the Owner dies before the Death Benefit Target Date, the Death
Benefit equals the greater of:
1. the basic Death Benefit described above; and
2. the Highest Anniversary Value as of the Owner's date of death.
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If the Owner dies on or after the Death Benefit Target Date, the Death
Benefit equals the greater of:
1. the basic Death Benefit described above; and
2. the Highest Anniversary Value on the Death Benefit Target Date plus
the sum of all Purchase Payments less the sum of all proportional
withdrawals since the Death Benefit Target Date.
THE AMOUNT DETERMINED BY THIS CALCULATION IS INCREASED BY ANY PURCHASE
PAYMENTS RECEIVED AFTER THE OWNER'S DATE OF DEATH AND DECREASED BY ANY
PROPORTIONAL WITHDRAWALS SINCE SUCH DATE.
THE HIGHEST ANNIVERSARY VALUE DEATH BENEFIT DESCRIBED ABOVE IS CURRENTLY
BEING OFFERED IN THOSE JURISDICTIONS WHERE WE HAVE RECEIVED REGULATORY
APPROVAL. CERTAIN TERMS AND CONDITIONS MAY DIFFER BETWEEN JURISDICTIONS
ONCE APPROVED. THE HIGHEST ANNIVERSARY VALUE DEATH BENEFIT IS NOT
AVAILABLE IF YOU HAVE ELECTED THE "COMBINATION 5% ROLL-UP AND HIGHEST
ANNIVERSARY VALUE" OR THE "HIGHEST DAILY VALUE" DEATH BENEFIT. IT ALSO
IS NOT AVAILABLE WITH SPOUSAL LIFETIME FIVE, SPOUSAL HIGHEST DAILY
LIFETIME SEVEN, OR THE SPOUSAL HIGHEST DAILY LIFETIME 7 PLUS BENEFIT.
PLEASE SEE APPENDIX F FOR A DESCRIPTION OF THE GUARANTEED MINIMUM DEATH
BENEFIT OFFERED BEFORE NOVEMBER 18, 2002 IN THOSE JURISDICTIONS WHERE WE
RECEIVED REGULATORY APPROVAL.
Please refer to the definition of Death Benefit Target Date below. This death
benefit may not be an appropriate feature where the Owner's age is near the
age specified in the Death Benefit Target Date. This is because the benefit
may not have the same potential for growth as it otherwise would, since there
will be fewer contract anniversaries before the death benefit target date is
reached. The death benefit target date under this death benefit is earlier
than the death benefit target date under the Combination 5% Roll-up and
Highest Anniversary Value Death Benefit for Owners who are age 76 or older
when the Annuity is issued, which may result in a lower value on the death
benefit, since there will be fewer contract anniversaries before the death
benefit target date is reached.
See Appendix B for examples of how the Highest Anniversary Value Death Benefit
is calculated.
COMBINATION 5% ROLL-UP AND HIGHEST ANNIVERSARY VALUE DEATH BENEFIT
If the Annuity has one Owner, the Owner must be age 79 or less at the time the
Combination 5% Roll-up and HAV Optional Death Benefit is purchased. If the
Annuity has joint Owners, the oldest Owner must be age 79 or less. If the
Annuity is owned by an entity, the Annuitant must be age 79 or less.
CERTAIN OF THE PORTFOLIOS OFFERED AS SUB-ACCOUNTS UNDER THE ANNUITY ARE NOT
AVAILABLE IF YOU ELECT THE COMBINATION 5% ROLL-UP AND HAV DEATH BENEFIT. IF
YOU ELECT THIS BENEFIT, YOU MUST ALLOCATE YOUR ACCOUNT VALUE IN ACCORDANCE
WITH THE THEN PERMITTED AND AVAILABLE INVESTMENT OPTIONS. IN ADDITION, WE
RESERVE THE RIGHT TO REQUIRE YOU TO USE CERTAIN ASSET ALLOCATION MODEL(S) IF
YOU ELECT THIS DEATH BENEFIT.
CALCULATION OF THE COMBINATION 5% ROLL-UP AND HIGHEST ANNIVERSARY VALUE DEATH
BENEFIT
The Combination 5% Roll-up and HAV Death Benefit equals the greatest of:
1. the basic Death Benefit described above; and
2. the Highest Anniversary Value Death Benefit described above; and
3. 5% Roll-up described below.
The calculation of the 5% Roll-up depends on whether death occurs before
or after the Death Benefit Target Date.
If the Owner dies before the Death Benefit Target Date the 5% Roll up is
equal to:
. all Purchase Payments increasing at an annual effective interest
rate of 5% starting on the date that each Purchase Payment is made
and ending on the Owner's date of death;
MINUS
. the sum of all withdrawals, dollar-for-dollar up to 5% of the Death
Benefit's value as of the prior contract anniversary (or Issue Date
if the withdrawal is in the first contract year). Any withdrawals in
excess of the 5% dollar-for-dollar limit are proportional.
If the Owner dies on or after the Death Benefit Target Date the 5%
Roll-up is equal to:
. the 5% Roll-up value as of the Death Benefit Target Date increased
by total Purchase Payments made after the Death Benefit Target Date;
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MINUS
. the sum of all withdrawals which reduce the 5% Roll-up
proportionally.
PLEASE REFER TO THE DEFINITIONS OF DEATH BENEFIT TARGET DATE BELOW. THIS DEATH
BENEFIT MAY NOT BE AN APPROPRIATE FEATURE WHERE THE OWNER'S AGE IS NEAR THE
AGE SPECIFIED IN THE DEATH BENEFIT TARGET DATE. THIS IS BECAUSE THE BENEFIT
MAY NOT HAVE THE SAME POTENTIAL FOR GROWTH AS IT OTHERWISE WOULD, SINCE THERE
WILL BE FEWER CONTRACT ANNIVERSARIES BEFORE THE DEATH BENEFIT TARGET DATE IS
REACHED.
THE COMBINATION 5% ROLL-UP AND HIGHEST ANNIVERSARY VALUE DEATH BENEFIT
DESCRIBED ABOVE IS CURRENTLY BEING OFFERED IN THOSE JURISDICTIONS WHERE WE
HAVE RECEIVED REGULATORY APPROVAL. THE "COMBINATION 5% ROLL-UP AND HIGHEST
ANNIVERSARY VALUE" DEATH BENEFIT IS NOT AVAILABLE IF YOU ELECT ANY OTHER
OPTIONAL DEATH BENEFIT OR ELECT SPOUSAL LIFETIME FIVE, SPOUSAL HIGHEST DAILY
LIFETIME SEVEN OR THE BIO FEATURE OF THE HIGHEST DAILY LIFETIME SEVEN OR THE
HIGHEST DAILY LIFETIME 7 PLUS SUITE OF BENEFITS. PLEASE SEE APPENDIX F FOR A
DESCRIPTION OF THE GUARANTEED MINIMUM DEATH BENEFIT OFFERED BEFORE
NOVEMBER 18, 2002 IN THOSE JURISDICTIONS WHERE WE RECEIVED REGULATORY APPROVAL.
See Appendix B for examples of how the "Combination 5% Roll-up and Highest
Anniversary Value" Death Benefit is calculated.
KEY TERMS USED WITH THE HIGHEST ANNIVERSARY VALUE DEATH BENEFIT AND THE
COMBINATION 5% ROLL-UP AND HIGHEST ANNIVERSARY VALUE DEATH BENEFIT:
. The Death Benefit Target Date for the Highest Anniversary Value Death
Benefit is the contract anniversary on or after the 80/th/ birthday of
the current Owner, the oldest of either joint Owner or the Annuitant, if
entity-owned.
. The Death Benefit Target Date for the Combination 5% Roll-up and HAV
Death Benefit is the later of the contract anniversary on or after the
80/th/ birthday of the current Owner, the oldest of either joint Owner
or the Annuitant, if entity owned, or five years after the Issue Date of
the Annuity.
. The Highest Anniversary Value equals the highest of all previous
"Anniversary Values" less proportional withdrawals since such
anniversary and plus any Purchase Payments since such anniversary.
. The Anniversary Value is the Account Value in the Sub-accounts plus the
Interim Value in any MVA Fixed Allocations as of each anniversary of the
Issue Date of the Annuity. The Anniversary Value on the Issue Date is
equal to your Purchase Payment.
. Proportional Withdrawals are determined by calculating the percentage of
your Account Value that each prior withdrawal represented when
withdrawn. Proportional withdrawals result in a reduction to the Highest
Anniversary Value or 5% Roll-up value by reducing such value in the same
proportion as the Account Value was reduced by the withdrawal as of the
date the withdrawal occurred. For example, if your Highest Anniversary
Value or 5% Roll-up value is $125,000 and you subsequently withdraw
$10,000 at a time when your Account Value is equal to $100,000 (a 10%
reduction), when calculating the optional Death Benefit we will reduce
your Highest Anniversary Value ($125,000) by 10% or $12,500.
HIGHEST DAILY VALUE DEATH BENEFIT ("HDV")
The Highest Daily Value Death Benefit is no longer available for new
elections. If the Annuity has one Owner, the Owner must have been age 79 or
less at the time the Highest Daily Value Death Benefit was elected. If the
Annuity has joint Owners, the older Owner must have been age 79 or less. If
there are Joint Owners, death of the Owner refers to the first to die of the
Joint Owners. If the Annuity is owned by an entity, the Annuitant must have
been age 79 or less at the time of election and death of the Owner refers to
the death of the Annuitant.
IF YOU ELECTED THIS BENEFIT, YOU MUST ALLOCATE YOUR ACCOUNT VALUE IN
ACCORDANCE WITH THE PERMITTED AND AVAILABLE OPTION(S) WITH THIS BENEFIT.
The HDV Death Benefit depends on whether death occurs before or after
the Death Benefit Target Date (see the definitions below).
If the Owner dies before the Death Benefit Target Date, the Death
Benefit equals the greater of:
1. the basic Death Benefit described above; and
2. the HDV as of the Owner's date of death.
If the Owner dies on or after the Death Benefit Target Date, the Death
Benefit equals the greater of:
1. the basic Death Benefit described above; and
2. the HDV on the Death Benefit Target Date plus the sum of all Purchase
Payments less the sum of all proportional withdrawals since the Death
Benefit Target Date.
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THE AMOUNT DETERMINED BY THIS CALCULATION IS INCREASED BY ANY PURCHASE
PAYMENTS RECEIVED AFTER THE OWNER'S DATE OF DEATH AND DECREASED BY ANY
PROPORTIONAL WITHDRAWALS SINCE SUCH DATE.
THE HIGHEST DAILY VALUE DEATH BENEFIT DESCRIBED ABOVE WAS OFFERED IN THOSE
JURISDICTIONS WHERE WE RECEIVED REGULATORY APPROVAL. THE HIGHEST DAILY VALUE
DEATH BENEFIT WAS NOT AVAILABLE IF YOU ELECTED THE GUARANTEED RETURN OPTION,
GUARANTEED RETURN OPTION PLUS, HIGHEST DAILY GRO, GUARANTEED RETURN OPTION
PLUS 2008 SPOUSAL LIFETIME FIVE, HIGHEST DAILY LIFETIME FIVE, HIGHEST DAILY
LIFETIME SEVEN, SPOUSAL HIGHEST DAILY LIFETIME SEVEN, THE HIGHEST DAILY
LIFETIME 7 PLUS BENEFITS, THE "COMBINATION 5% ROLL-UP AND HIGHEST ANNIVERSARY
VALUE" DEATH BENEFIT, OR THE HIGHEST ANNIVERSARY VALUE DEATH BENEFIT.
KEY TERMS USED WITH THE HIGHEST DAILY VALUE DEATH BENEFIT:
.. The Death Benefit Target Date for the Highest Daily Value Death Benefit is
the later of the Annuity anniversary on or after the 80/th/ birthday of the
current Owner, or the older of either the joint Owner or the Annuitant, if
entity owned, or five years after the Issue Date of the Annuity.
.. The Highest Daily Value equals the highest of all previous "Daily Values"
less proportional withdrawals since such date and plus any Purchase
Payments since such date.
.. The Daily Value is the Account Value as of the end of each Valuation Day.
The Daily Value on the Issue Date is equal to your Purchase Payment.
.. Proportional Withdrawals are determined by calculating the percentage of
your Account Value that each prior withdrawal represented when withdrawn.
Proportional withdrawals result in a reduction to the Highest Daily Value
by reducing such value in the same proportion as the Account Value was
reduced by the withdrawal as of the date the withdrawal occurred. For
example, if your Highest Daily Value is $125,000 and you subsequently
withdraw $10,000 at a time when your Account Value is equal to $100,000 (a
10% reduction), when calculating the optional Death Benefit we will reduce
your Highest Daily Value ($125,000) by 10% or $12,500.
Please see Appendix B to this Prospectus for a hypothetical example of how the
HDV Death Benefit is calculated.
ANNUITIES WITH JOINT OWNERS
For Annuities with joint owners, the Death Benefits are calculated as shown
above except that the age of the oldest of the Joint Owners is used to
determine the Death Benefit Target Date. NOTE: If you and your spouse own your
Annuity jointly, we will pay the Death Benefit to the Beneficiary. If the sole
primary Beneficiary is the surviving spouse, then the surviving spouse can
elect to assume ownership of your Annuity and continue the Annuity instead of
receiving the Death Benefit (unless the Annuity is held as a Beneficiary
Annuity).
ANNUITIES OWNED BY ENTITIES
For Annuities owned by an entity, the Death Benefits are calculated as shown
above except that the age of the Annuitant is used to determine the Death
Benefit Target Date. Payment of the Death Benefit is based on the death of the
Annuitant (or Contingent Annuitant, if applicable).
CAN I TERMINATE THE OPTIONAL DEATH BENEFITS? DO THE OPTIONAL DEATH BENEFITS
TERMINATE UNDER OTHER CIRCUMSTANCES?
You can terminate the Enhanced Beneficiary Protection Death Benefit and the
Highest Anniversary Value Death Benefit at any time. The "Combination 5%
Roll-up and HAV Death Benefit" and the HDV Death Benefit may not be terminated
once elected. The optional Death Benefits will terminate automatically on the
Annuity Date. Also, if you elected one of either the Highest Anniversary Value
or the Combination 5% Roll-up and HAV Death Benefits and, in addition, are
taking withdrawals under a guaranteed minimum withdrawal or a lifetime
guaranteed minimum withdrawal benefit, these optional Death Benefits will
terminate if such withdrawals cause your Account Value to reduce to zero. We
may also terminate any optional Death Benefit if necessary to comply with our
interpretation of the Code and applicable regulations. For jointly owned
Annuities, the optional death benefits are payable upon the first death of
either Owner and therefore terminate and do not continue if a surviving spouse
continues the Annuity. Where an Annuity is structured so that it is owned by a
grantor trust but the annuitant is not the grantor, then the Annuity is
required to terminate upon the death of the grantor if the grantor
pre-deceases the annuitant under Section 72(s) of the Code. Under this
circumstance, the Account Value will be paid out to the beneficiary and it is
not eligible for the death benefit provided under the Annuity.
WHAT ARE THE CHARGES FOR THE OPTIONAL DEATH BENEFITS?
For elections of the Highest Anniversary Value Death Benefit and the
Combination 5% Roll-Up and HAV Death Benefit made on or after May 1, 2009, we
impose a charge equal to 0.40% and 0.80%, respectively, per year of the
average daily net assets of the Sub-accounts. For elections of the Highest
Anniversary Value Death Benefit and the Combination 5% Roll-Up and HAV Death
Benefit that were made prior to May 1, 2009, we impose a charge equal to 0.25%
and 0.50%, respectively, per year of the average daily net assets of the
Sub-accounts. We deduct a charge equal to 0.25% per year of the average daily
net assets of the Sub-accounts for the Enhanced Beneficiary Protection Death
Benefit and 0.50% per year of the average daily net assets of the Sub-accounts
for the HDV Death Benefit. We deduct the charge for each of these benefits to
compensate Prudential Annuities for providing increased insurance protection
under the optional Death Benefits. The additional annual charge is deducted
daily against your Account Value allocated to the Sub-accounts.
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Please refer to the section entitled "Tax Considerations" for additional
considerations in relation to the optional Death Benefit.
PAYMENT OF DEATH BENEFITS
ALTERNATIVE DEATH BENEFIT PAYMENT OPTIONS - ANNUITIES OWNED BY INDIVIDUALS
(NOT ASSOCIATED WITH TAX-FAVORED PLANS)
Except in the case of a spousal assumption as described below, upon your
death, certain distributions must be made under the Annuity. The required
distributions depend on whether you die before you start taking annuity
payments under the Annuity or after you start taking annuity payments under
the Annuity.
If you die on or after the Annuity Date, the remaining portion of the interest
in the Annuity must be distributed at least as rapidly as under the method of
distribution being used as of the date of death.
In the event of your death before the annuity start date, the Death Benefit
must be distributed:
. within five (5) years of the date of death (the "5 Year Deadline"); or
. as a series of payments not extending beyond the life expectancy of the
Beneficiary or over the life of the Beneficiary. Payments under this
option must begin within one year of the date of death. If the
Beneficiary does not begin installments by such time, then we require
that the Beneficiary take the Death Benefit as a lump sum within the 5
Year Deadline.
Unless you have made an election prior to Death Benefit proceeds becoming due,
a beneficiary can elect to receive the Death Benefit proceeds under the
Beneficiary Continuation Option as described below in the section entitled
"Beneficiary Continuation Option," as a series of required distributions.
If the Annuity is held as a Beneficiary Annuity, the payment of the Death
Benefit must be distributed:
. as a lump sum payment; or
. Unless you have made an election prior to Death Benefit proceeds
becoming due, a beneficiary can elect to receive the Death Benefit
proceeds under the Beneficiary Continuation Option as described below in
the section entitled "Beneficiary Continuation Option," as a series of
required distributions.
Upon our receipt of proof of death, we will send to the beneficiary materials
that list these payment options.
ALTERNATIVE DEATH BENEFIT PAYMENT OPTIONS - ANNUITIES HELD BY TAX-FAVORED PLANS
The Code provides for alternative death benefit payment options when an
Annuity is used as an IRA, 403(b) or other "qualified investment" that
requires minimum distributions. Upon your death under an IRA, 403(b) or other
"qualified investment", the designated Beneficiary may generally elect to
continue the Annuity and receive Required Minimum Distributions under the
Annuity instead of receiving the death benefit in a single payment. The
available payment options will depend on whether you die before the date
Required Minimum Distributions under the Code were to begin, whether you have
named a designated beneficiary and whether the Beneficiary is your surviving
spouse.
. If you die after a designated beneficiary has been named, the death
benefit must be distributed by December 31/st/ of the year including the
five year anniversary of the date of death, or as periodic payments not
extending beyond the life expectancy of the designated beneficiary
(provided such payments begin by December 31/st/ of the year following
the year of death). If the Beneficiary does not begin installments by
such time, then we require that the Beneficiary take the Death Benefit
as a lump sum within the 5 Year Deadline. However, if your surviving
spouse is the beneficiary, the death benefit can be paid out over the
life expectancy of your spouse with such payments beginning no later
than December 31/st/ of the year following the year of death or
December 31/st/ of the year in which you would have reached age 70 1/2,
which ever is later. Additionally, if the contract is solely payable to
(or for the benefit of) your surviving spouse, then the Annuity may be
continued with your spouse as the owner. Note that the Worker, Retiree
and Employer Recovery Act of 2008 suspended Required Minimum
Distributions for 2009. If your beneficiary elects to receive full
distribution by December 31/st/ of the year including the five year
anniversary of the date of death, 2009 shall not be included in the five
year requirement period. This effectively extends this period to
December 31/st/ of the year including the six year anniversary date of
death.
. If you die before a designated beneficiary is named and before the date
required minimum distributions must begin under the Code, the death
benefit must be paid out by December 31/st/ of the year including the
five year anniversary of the date of death. If the Beneficiary does not
begin installments by such time, then we require that the Beneficiary
take the Death Benefit as a lump sum within the 5 Year Deadline. For
contracts where multiple beneficiaries have been named and at least one
of the beneficiaries does not qualify as a designated beneficiary and
the account has not been divided into separate accounts by
December 31/st/ of the year following the year of death, such contract
is deemed to have no designated beneficiary. For this distribution
requirement also, 2009 shall not be included in the five year
requirement period.
. If you die before a designated beneficiary is named and BEFORE the date
required minimum distributions must begin under the Code, the death
benefit must be paid out within five years from the date of death. For
contracts where multiple beneficiaries have been named and at least one
of the beneficiaries does not qualify as a designated beneficiary and
the account has not been divided into separate accounts by
December 31/st/ of the year following the year of death, such contract
is deemed to have no designated beneficiary.
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. If you die before a designated beneficiary is named and AFTER the date
required minimum distributions must begin under the Code, the death
benefit must be paid out at least as rapidly as under the method then in
effect. For contracts where multiple beneficiaries have been named and
at least one of the beneficiaries does not qualify as a designated
beneficiary and the account has not been divided into separate accounts
by December 31/st/ of the year following the year of death, such
contract is deemed to have no designated beneficiary.
A beneficiary has the flexibility to take out more each year than mandated
under the Required Minimum Distribution rules.
Until withdrawn, amounts in an IRA, 403(b) or other "qualified investment"
continue to be tax deferred. Amounts withdrawn each year, including amounts
that are required to be withdrawn under the Required Minimum Distribution
rules, are subject to tax. You may wish to consult a professional tax advisor
for tax advice as to your particular situation.
For a Roth IRA, if death occurs before the entire interest is distributed, the
death benefit must be distributed under the same rules applied to IRAs where
death occurs before the date Required Minimum Distributions must begin under
the Code.
The tax consequences to the beneficiary may vary among the different death
benefit payment options. See the Tax Considerations section of this
prospectus, and consult your tax advisor.
BENEFICIARY CONTINUATION OPTION
Instead of receiving the death benefit in a single payment, or under an
Annuity Option, a beneficiary may take the death benefit under an alternative
death benefit payment option, as provided by the Code and described above
under the sections entitled "Payment of Death Benefits" and "Alternative Death
Benefit Payment Options - Annuities Held by Tax-Favored Plans." This
"Beneficiary Continuation Option" is described below and is available for both
qualified Annuities (i.e. annuities sold to an IRA, Roth IRA, SEP IRA, or
403(b)), Beneficiary Annuities and non-qualified Annuities.
UNDER THE BENEFICIARY CONTINUATION OPTION:
.. The beneficiary must apply at least $15,000 to the Beneficiary Continuation
Option. Thus, the death benefit must be at least $15,000.
.. The Owner's Annuity will be continued in the Owner's name, for the benefit
of the beneficiary.
.. Beginning on the date we receive an election by the beneficiary to take the
death benefit in a form other than a lump sum, the beneficiary will incur a
Settlement Service Charge which is an annual charge assessed on a daily
basis against the average assets allocated to the Sub-accounts. For
non-qualified Annuities the charge is 1.00% per year, and for qualified
Annuities the charge is 1.40% per year.
.. Beginning on the date we receive an election by the beneficiary to take the
death benefit in a form other than a lump sum, the beneficiary will incur
an annual maintenance fee equal to the lesser of $30 or 2% of Account
Value. For non-qualified annuities, the fee will only apply if the Account
Value is less than $25,000 at the time the fee is assessed. The fee will
not apply if it is assessed 30 days prior to a surrender request.
.. The initial Account Value will be equal to any death benefit (including any
optional death benefit) that would have been payable to the beneficiary if
the beneficiary had taken a lump sum distribution.
.. The available Sub-accounts will be among those available to the Owner at
the time of death, however certain Sub-Accounts may not be available.
.. The beneficiary may request transfers among Sub-accounts, subject to the
same limitations and restrictions that applied to the Owner. Transfers in
excess of 20 per year will incur a $10 transfer fee.
.. No Fixed Allocations or fixed interest rate options will be offered for
non-qualified Beneficiary Continuation Options. However, for qualified
Annuities, the Fixed Allocations will be those offered at the time the
Beneficiary Continuation Option is elected.
.. No additional Purchase Payments can be applied to the Annuity.
.. The basic death benefit and any optional benefits elected by the Owner will
no longer apply to the beneficiary.
.. The beneficiary can request a withdrawal of all or a portion of the Account
Value at any time, unless the Beneficiary Continuation Option was the
payout predetermined by the Owner and the Owner restricted the beneficiary
withdrawal rights.
.. Upon the death of the Beneficiary, any remaining Account Value will be paid
in a lump sum to the person(s) named by the beneficiary (successor), unless
the successor chooses to continue receiving payments.
.. If the beneficiary elects to receive the death benefit proceeds under the
Beneficiary Continuation Option, we must receive the election in good order
at least 14 days prior to the first required distribution. If, for any
reason, the election impedes our ability to complete the first distribution
by the required date, we will be unable to accept the election.
Currently only Investment Options corresponding to Portfolios of the Advanced
Series Trust and the ProFund VP are available under the Beneficiary
Continuation Option.
In addition to the materials referenced above, the Beneficiary will be
provided with a prospectus and a settlement agreement describing the
Beneficiary Continuation Option. We may pay compensation to the broker-dealer
of record on the Annuity based on
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amounts held in the Beneficiary Continuation Option. Please contact us for
additional information on the availability, restrictions and limitations that
will apply to a beneficiary under the Beneficiary Continuation Option.
SPOUSAL ASSUMPTION OF ANNUITY
You may name your spouse as your beneficiary. If you and your spouse own your
Annuity jointly, we assume that the sole primary beneficiary will be the
surviving spouse unless you elect an alternative Beneficiary designation.
Unless you elect an alternative Beneficiary Designation or the Annuity is held
as a Beneficiary Annuity (if available under your Annuity), the spouse
beneficiary may elect to assume ownership of the Annuity instead of taking the
Death Benefit payment. Any Death Benefit (including any optional Death
Benefits) that would have been payable to the Beneficiary will become the new
Account Value as of the date we receive due proof of death and any required
proof of a spousal relationship. As of the date the assumption is effective,
the surviving spouse will have all the rights and benefits that would be
available under the Annuity to a new purchaser of the same attained age.
For purposes of determining any future Death Benefit for the surviving spouse,
the new Account Value will be considered as the initial Purchase Payment. Any
additional Purchase Payments applied after the date the assumption is
effective will be subject to all provisions of the Annuity.
A surviving spouse's ability to continue ownership of the Annuity may be
impacted by the Defense of Marriage Act (see "Managing Your Annuity - Spousal
Designations"). Please consult your tax or legal adviser for more information
about such impact in your state.
See the section entitled "Managing Your Annuity - Spousal Designations" and
"Contingent Annuitant" for a discussion of the treatment of a spousal
Contingent Annuitant in the case of the death of the Annuitant in an Annuity
owned by a Custodial Account.
WHEN DO YOU DETERMINE THE DEATH BENEFIT?
We determine the amount of the Death Benefit as of the date we receive "due
proof of death", (and in certain limited circumstances as of the date of
death) any instructions we require to determine the method of payment and any
other written representations we require to determine the proper payment of
the Death Benefit. "Due proof of death" may include a certified copy of a
death certificate, a certified copy of a decree of a court of competent
jurisdiction as to the finding of death or other satisfactory proof of death.
Upon our receipt of "due proof of death" we automatically transfer the Death
Benefit to the AST Money Market Sub-account until we further determine the
universe of eligible Beneficiaries. Once the universe of eligible
Beneficiaries has been determined each eligible Beneficiary may allocate his
or her eligible share of the Death Benefit to an eligible annuity payment
option.
Each Beneficiary must make an election as to the method they wish to receive
their portion of the Death Benefit. Absent an election of a Death Benefit
payment method, no Death Benefit can be paid to the Beneficiary. We may
require written acknowledgment of all named Beneficiaries before we can pay
the Death Benefit. DURING THE PERIOD FROM THE DATE OF DEATH UNTIL WE RECEIVE
ALL REQUIRED PAPER WORK, THE AMOUNT OF THE DEATH BENEFIT MAY BE SUBJECT TO
MARKET FLUCTUATIONS.
EXCEPTIONS TO AMOUNT OF DEATH BENEFIT
There are certain exceptions to the amount of the Death Benefit:
Death Benefit Suspension Period. You should be aware that there is a Death
Benefit suspension period (unless prohibited by applicable law). If the
decedent was not the Owner or Annuitant as of the Issue Date (or within 60
days thereafter), and did not become the Owner or Annuitant due to the prior
Owner's or Annuitant's death, any Death Benefit (including any optional Death
Benefit) that applies will be suspended for a two-year period as to that
person from the date he or she first became Owner or Annuitant. While the two
year suspension is in effect, the Death Benefit amount will equal the Account
Value plus the Interim Value in the MVA Fixed Allocations. Thus, if you had
elected an Optional Death benefit, and the suspension were in effect, you
would be paying the fee for the Optional Death Benefit even though during the
suspension period your Death Benefit would have been limited to the Account
Value plus the Interim Value in the MVA Fixed Allocations. After the two year
suspension period is completed, the Death Benefit is the same as if the
suspension period had not been in force. See the section of the prospectus
above generally with regard to changes of Owner and Annuitant that are
allowable.
With respect to a Beneficiary Annuity, the Death Benefit is triggered by the
death of the beneficial Owner (or the Key Life, if entity-owned). However, if
the Annuity is held as a Beneficiary Annuity, the Owner is an entity, and the
Key Life is already deceased, then no Death Benefit is payable upon the death
of the beneficial Owner.
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VALUING YOUR INVESTMENT
HOW IS MY ACCOUNT VALUE DETERMINED?
During the accumulation period, the Annuity has an Account Value. The Account
Value is determined separately for each Sub-account allocation and for each
Fixed Allocation. The Account Value is the sum of the values of each
Sub-account allocation and the value of each Fixed Allocation. For Annuities
with a Highest Daily Lifetime Five election, Account Value also includes the
value of any allocation to the Benefit Fixed Rate Account. See the "Living
Benefits - Highest Daily Lifetime Five" section of the Prospectus for a
description of the Benefit Fixed Rate Account. When determining the Account
Value on any day other than a MVA Fixed Allocation's Maturity Date, the
Account Value may include any Market Value Adjustment that would apply to a
MVA Fixed Allocation (if withdrawn or transferred) on that day.
WHAT IS THE SURRENDER VALUE OF MY ANNUITY?
The Surrender Value of your Annuity is the value available to you on any day
during the accumulation period. The Surrender Value is defined under "Glossary
of Terms" above.
HOW AND WHEN DO YOU VALUE THE SUB-ACCOUNTS?
When you allocate Account Value to a Sub-account, you are purchasing units of
the Sub-account. Each Sub-account invests exclusively in shares of an
underlying Portfolio. The value of the Units fluctuates with the market
fluctuations of the Portfolios. The value of the Units also reflects the daily
accrual for the Insurance Charge and if you elected one or more optional
benefits whose annual charge is deducted daily, the additional charge made for
such benefits. There may be several different Unit Prices for each Sub-account
to reflect the Insurance Charge and the charges for any optional benefits. The
Unit Price for the Units you purchase will be based on the total charges for
the benefits that apply to your Annuity. See the section entitled "What
Happens to My Units When There is a Change in Daily Asset-Based Charges?" for
a detailed discussion of how Units are purchased and redeemed to reflect
changes in the daily charges that apply to your Annuity. Each Valuation Day,
we determine the price for a Unit of each Sub-account, called the "Unit
Price." The Unit Price is used for determining the value of transactions
involving Units of the Sub-accounts. We determine the number of Units involved
in any transaction by dividing the dollar value of the transaction by the Unit
Price of the Sub-account as of the Valuation Day.
EXAMPLE
Assume you allocate $5,000 to a Sub-account. On the Valuation Day you make the
allocation, the Unit Price is $14.83. Your $5,000 buys 337.154 Units of the
Sub-account. Assume that later, you wish to transfer $3,000 of your Account
Value out of that Sub-account and into another Sub-account. On the Valuation
Day you request the transfer, the Unit Price of the original Sub-account has
increased to $16.79 and the Unit Price of the new Sub-account is $17.83. To
transfer $3,000, we sell 178.677 Units at the current Unit Price, leaving you
158.477 Units. We then buy $3,000 of Units of the new Sub-account at the Unit
Price of $17.83. You would then have 168.255 Units of the new Sub-account.
HOW DO YOU VALUE FIXED ALLOCATIONS?
During the Guarantee Period, we use the concept of an Interim Value for the
MVA Fixed Allocations. The Interim Value can be calculated on any day and is
equal to the initial value allocated to a Fixed Allocation plus all interest
credited to a MVA Fixed Allocation as of the date calculated. The Interim
Value does not include the impact of any Market Value Adjustment. If you made
any transfers or withdrawals from a MVA Fixed Allocation, the Interim Value
will reflect the withdrawal of those amounts and any interest credited to
those amounts before they were withdrawn. To determine the Account Value of a
MVA Fixed Allocation on any day other than its Maturity Date, we multiply the
Account Value of the MVA Fixed Allocation times the Market Value Adjustment
factor. In addition to MVA Fixed Allocations that are subject to a Market
Value Adjustment, we offer DCA Fixed Rate Options that are used with our 6 or
12 Month Dollar Cost Averaging Program, and are not subject to any MVA.
Account Value allocated to the DCA Fixed Rate Options earns the declared rate
of interest while it is transferred over a 6 month or 12 month period into the
Sub-accounts that you have designated.
WHEN DO YOU PROCESS AND VALUE TRANSACTIONS?
Prudential Annuities is generally open to process financial transactions on
those days that the New York Stock Exchange (NYSE) is open for trading. There
may be circumstances where the NYSE does not open on a regularly scheduled
date or time or closes at an earlier time than scheduled (normally 4:00 p.m.
EST). Generally, financial transactions requested before the close of the NYSE
which meet our requirements will be processed according to the value next
determined following the close of business. Financial transactions requested
on a non-Valuation Day or after the close of the NYSE will be processed based
on the value next computed on the next Valuation Day. There may be
circumstances when the opening or closing time of the NYSE is different than
other major stock exchanges, such as NASDAQ or the American Stock Exchange.
Under such circumstances, the closing time of the NYSE will be used when
valuing and processing transactions.
We have arrangements with certain selling firms, under which receipt by the
firm in good order prior to our cut-off time on a given Valuation Day is
treated as receipt by us on that Valuation Day for pricing purposes.
Currently, we have such an arrangement with Citigroup Global Markets Inc.
("CGM"). We extend this pricing treatment to orders that you submit directly
through CGM and to
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certain orders submitted through Morgan Stanley Smith Barney LLC ("MSSB")
where CGM serves as clearing firm for MSSB. Your MSSB registered
representative can tell you whether your order will be cleared through CGM. In
addition, we currently have an arrangement with Merrill, Lynch, Pierce,
Fenner & Smith, Inc. ("Merrill Lynch") under which transfer orders between
Sub-accounts that are received in good order by Merrill Lynch prior to the
NYSE close on a given Valuation Day will be priced by us as of that Valuation
Day. The arrangements with CGM, MSSB, and Merrill Lynch may be terminated or
modified in certain circumstances.
There may be circumstances where the NYSE is open, however, due to inclement
weather, natural disaster or other circumstances beyond our control, our
offices may be closed or our business processing capabilities may be
restricted. Under those circumstances, your Account Value may fluctuate based
on changes in the Unit Values, but you may not be able to transfer Account
Value, or make a purchase or redemption request.
The NYSE is closed on the following nationally recognized holidays: New Year's
Day, Martin Luther King, Jr. Day, Presidents' Day, Good Friday, Memorial Day,
Independence Day, Labor Day, Thanksgiving, and Christmas. On those dates, we
will not process any financial transactions involving purchase or redemption
orders. Prudential Annuities will also not process financial transactions
involving purchase or redemption orders or transfers on any day that:
.. trading on the NYSE is restricted;
.. an emergency exists, as determined by the SEC, making redemption or
valuation of securities held in the separate account impractical; or
.. the SEC, by order, permits the suspension or postponement for the
protection of security holders.
If, pursuant to SEC rules, the AST Money Market Portfolio suspends payment of
redemption proceeds in connection with a liquidation of the Portfolio, we will
delay payment of any transfer, full or partial withdrawal, or death
benefit from the AST Money Market Sub-account until the Portfolio is
liquidated.
INITIAL PURCHASE PAYMENTS: We are required to allocate your initial Purchase
Payment to the Sub-accounts within two (2) Valuation Days after we receive all
of our requirements to issue the Annuity. If we do not have all the required
information to allow us to issue your Annuity, we may retain the Purchase
Payment while we try to reach you or your representative to obtain all of our
requirements. If we are unable to obtain all of our required information
within five (5) Valuation Days, we are required to return the Purchase Payment
to you at that time, unless you specifically consent to our retaining the
Purchase Payment while we gather the required information. Once we obtain the
required information, we will invest the Purchase Payment and issue the
Annuity within two (2) Valuation Days. With respect to both your initial
Purchase Payment and any subsequent Purchase Payment that is pending
investment in our separate account, we may hold the amount temporarily in our
general account and may earn interest on such amount. You will not be credited
with interest during that period.
As permitted by applicable law, the broker-dealer firm through which you
purchase your Annuity may forward your initial Purchase Payment to us prior to
approval of your purchase by a registered principal of the firm. These
arrangements are subject to a number of regulatory requirements, including
that until such time that the insurer is notified of the firm's principal
approval and is provided with the application, or is notified of the firm
principal's rejection, customer funds will be held by the insurer in a
segregated bank account. In addition, the insurer must promptly return the
customer's funds at the customer's request prior to the firm's principal
approval or upon the firm's rejection of the application. The monies held in
the bank account will be held in a suspense account within our general account
and we may earn interest on amounts held in that suspense account. Contract
owners will not be credited with any interest earned on amounts held in that
suspense account. The monies in such suspense account may be subject to our
general creditors. Moreover, because the FINRA rule authorizing the use of
such accounts is new, there may be uncertainty as to the segregation and
treatment of such insurance company general account assets under applicable
Federal and State laws.
ADDITIONAL PURCHASE PAYMENTS: We will apply any additional Purchase Payments
on the Valuation Day that we receive the Purchase Payment with satisfactory
allocation instructions.
SCHEDULED TRANSACTIONS: Scheduled transactions include transfers made in
connection with dollar cost averaging, the asset allocation Program
auto-rebalancing, systematic withdrawals, systematic investments, required
minimum distributions, substantially equal periodic payments under
Section 72(t) of the Code, or annuity payments. Scheduled transactions are
processed and valued as of the date they are scheduled, unless the scheduled
day is not a Valuation Day. In that case, the transaction will be processed
and valued on the next Valuation Day, unless (with respect to required minimum
distributions, substantially equal periodic payments under Section 72(t) of
the Code, systematic withdrawals and annuity payments only), the next
Valuation Day falls in the subsequent calendar year, in which case the
transaction will be processed and valued on the prior Valuation Day.
UNSCHEDULED TRANSACTIONS: "Unscheduled" transactions include any other
non-scheduled transfers and requests for Partial Withdrawals or Free
Withdrawals or Surrenders. With respect to certain written requests to
withdraw Account Value, we may seek to verify the requesting Owner's
signature. Specifically, we reserve the right to perform a signature
verification for (a) any
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withdrawal exceeding a certain dollar amount and (b) a withdrawal exceeding a
certain dollar amount if the payee is someone other than the Owner. In
addition, we will not honor a withdrawal request in which the requested payee
is the Financial Professional or agent of record. We reserve the right to
request a signature guarantee with respect to a written withdrawal request. If
we do perform a signature verification, we will pay the withdrawal proceeds
within 7 days after the withdrawal request was received by us in good order,
and will process the transaction in accordance with the discussion in "When Do
You Process And Value Transactions?"
DEATH BENEFITS: Death Benefit claims require our review and evaluation before
processing. We price such transactions as of the date we receive all
supporting documentation we require for such transactions and that are
satisfactory to us.
We are generally required by law to pay any surrender request or death benefit
claims from the Separate Account within 7 days of our receipt of your request
in good order.
TRANSACTIONS IN RYDEX AND PROFUNDS VP SUB-ACCOUNTS: Generally, purchase or
redemption orders or transfer requests must be received by us by no later than
the close of the NYSE to be processed on the current Valuation Day. However,
any purchase order or transfer request involving the Rydex or ProFunds VP
Sub-accounts must be received by us no later than one hour prior to any
announced closing of the applicable securities exchange (generally, 3:00 p.m.
Eastern time) to be processed on the current Valuation Day. The "cut-off" time
for such financial transactions involving a Rydex or ProFunds VP Sub-account
will be extended to 1/2 hour prior to any announced closing (generally, 3:30
p.m. Eastern time) for transactions submitted electronically through
Prudential Annuities' Internet website (www.prudentialannuities.com). You
cannot request a transaction (other than a redemption order) involving the
transfer of units in one of the Rydex or ProFunds VP Sub-accounts between the
applicable "cut-off" time and 4:00 p.m. Owners attempting to process a
purchase order or transfer request between the applicable "cut-off" time and
4:00 p.m., are informed that their transactions cannot be processed as
requested. We will not process the trade until we receive further instructions
from you. However, Owners receiving the "cut off" message may process a
purchase order or transfer request up until 4:00 p.m. on that same day with
respect to any other available investment option under their Annuity, other
than Rydex and ProFunds. Transactions received after 4:00 p.m. will be treated
as received by us on the next Valuation Day.
WHAT HAPPENS TO MY UNITS WHEN THERE IS A CHANGE IN DAILY ASSET-BASED CHARGES?
TERMINATION OF OPTIONAL BENEFITS: Except for the Guaranteed Minimum Income
Benefit, the Combination 5% Roll-up and Highest Anniversary Value Death
Benefit and the Highest Daily Value Death Benefit, which generally cannot be
terminated by the owner once elected, if any optional benefit terminates, we
will no longer deduct the charge we apply to purchase the optional benefit.
Certain optional benefits may be added after you have purchased your Annuity.
On the date a charge no longer applies or a charge for an optional benefit
begins to be deducted, your Annuity will become subject to a different daily
asset-based charge. This change may result in the number of Units attributed
to your Annuity and the value of those units being different than it was
before the change, however, the adjustment in the number of Units and Unit
Price will not affect your Account Value (although the change in charges that
are deducted will affect your Account Value).
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TAX CONSIDERATIONS
The tax considerations associated with an Annuity vary depending on whether
the contract is (i) owned by an individual or non-natural person, and not
associated with a tax-favored retirement plan, or (ii) held under a
tax-favored retirement plan. We discuss the tax considerations for these
categories of contracts below. The discussion is general in nature and
describes only federal income tax law (not state or other tax laws). It is
based on current law and interpretations, which may change. The information
provided is not intended as tax advice. You should consult with a qualified
tax advisor for complete information and advice. References to Purchase
Payments below relate to your cost basis in your contract. Generally, your
cost basis in a contract not associated with a tax-favored retirement plan is
the amount you pay into your contract, or into annuities exchanged for your
contract, on an after-tax basis less any withdrawals of such payments. Cost
basis for a tax-favored retirement plan is provided only in limited
circumstances, such as for contributions to a Roth IRA or nondeductible IRA.
The discussion includes a description of certain spousal rights under the
contract, and our administration of such spousal rights and related tax
reporting comport with our understanding of the Defense of Marriage Act (which
defines a "marriage" as a legal union between a man and a woman and a "spouse"
as a person of the opposite sex). Depending on the state in which your annuity
was issued, we may offer certain spousal benefits to civil union couples,
domestic partners or same-sex marriages. You should be aware, however, that
federal tax law does not recognize civil union couples, domestic partners or
marriage spouses of the same sex. Therefore, we cannot permit a same-sex civil
union partner, domestic partner or spouse to continue the annuity within the
meaning of the tax law upon the death of the first partner under the annuity's
"spousal continuance" provision. Please note there may be federal tax
consequences at the death of the first same-sex civil union partner, domestic
partner or spouse. Civil union couples, domestic partners and spouses of the
same sex should consider that limitation before selecting a spousal benefit
under the annuity.
The discussion below generally assumes that the Annuity is issued to the
Annuity Owner. For Annuities issued under the Beneficiary Continuation Option
or as a Beneficiary Annuity, refer to the Taxes Payable by Beneficiaries for
Nonqualified Annuity Contracts and Required Distributions Upon Your Death for
Qualified Annuity Contracts in this Tax Considerations section.
NONQUALIFIED ANNUITY CONTRACTS
IN GENERAL, AS USED IN THIS PROSPECTUS, A NONQUALIFIED ANNUITY IS OWNED BY AN
INDIVIDUAL OR NON-NATURAL PERSON AND IS NOT ASSOCIATED WITH A TAX-FAVORED
RETIREMENT PLAN.
TAXES PAYABLE BY YOU
We believe the Annuity is an annuity contract for tax purposes. Accordingly,
as a general rule, you should not pay any tax until you receive money under
the contract. Generally, annuity contracts issued by the same company (and
affiliates) to you during the same calendar year must be treated as one
annuity contract for purposes of determining the amount subject to tax under
the rules described below. Charges for investment advisory fees that are taken
from the contract are treated as a partial withdrawal from the contract and
will be reported as such to the contract Owner.
It is possible that the Internal Revenue Service (IRS) could assert that some
or all of the charges for the optional benefits under the contract should be
treated for federal income tax purposes as a partial withdrawal from the
contract. If this were the case, the charge for this benefit could be deemed a
withdrawal and treated as taxable to the extent there are earnings in the
contract. Additionally, for Owners under age 59 1/2, the taxable income
attributable to the charge for the benefit could be subject to a tax penalty.
If the IRS determines that the charges for one or more benefits under the
contract are taxable withdrawals, then the sole or surviving Owner will be
provided with a notice from us describing available alternatives regarding
these benefits.
You must commence annuity payments or surrender your Annuity no later than the
first day of the calendar month next following the maximum Annuity date for
your Annuity. For some of our contracts, you are able to choose to defer the
Annuity Date beyond the default Annuity date described in your Annuity.
However, the IRS may not then consider your contract to be an annuity under
the tax law.
TAXES ON WITHDRAWALS AND SURRENDER
If you make a withdrawal from your contract or surrender it before annuity
payments begin, the amount you receive will be taxed as ordinary income,
rather than as return of Purchase Payments, until all gain has been withdrawn.
Once all gain has been withdrawn, payments will be treated as a nontaxable
return of Purchase Payments until all Purchase Payments have been returned.
After all Purchase Payments are returned, all subsequent amounts will be taxed
as ordinary income. You will generally be taxed on any withdrawals from the
contract while you are alive even if the withdrawal is paid to someone else.
Withdrawals under any of the optional living benefits or as a systematic
payment are taxed under these rules. If you assign or pledge all or part of
your contract as collateral for a loan, the part assigned generally will be
treated as a withdrawal and subject to income tax to the extent of gain. If
you transfer your contract for less than full consideration, such as by gift,
you will also trigger tax on any gain in the contract. This rule does not
apply if you transfer the contract to your spouse or under most circumstances
if you transfer the contract incident to divorce.
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If you choose to receive payments under an interest payment option, or a
Beneficiary chooses to receive a death benefit under an interest payment
option, that election will be treated, for tax purposes, as surrendering your
Annuity and will immediately subject any gain in the contract to income tax.
TAXES ON ANNUITY PAYMENTS
A portion of each annuity payment you receive will be treated as a partial
return of your Purchase Payments and will not be taxed. The remaining portion
will be taxed as ordinary income. Generally, the nontaxable portion is
determined by multiplying the annuity payment you receive by a fraction, the
numerator of which is your Purchase Payments (less any amounts previously
received tax-free) and the denominator of which is the total expected payments
under the contract. After the full amount of your Purchase Payments has been
recovered tax-free, the full amount of the annuity payments will be taxable.
If annuity payments stop due to the death of the Annuitant before the full
amount of your Purchase Payments have been recovered, a tax deduction may be
allowed for the unrecovered amount.
If your Account Value is reduced to zero but the Annuity remains in force due
to a benefit provision, further distributions from the Annuity will be
reported as annuity payments, using an exclusion ratio based upon the
undistributed purchase payments in the Annuity and the total value of the
anticipated future payments until such time as all Purchase Payments have been
recovered.
Please refer to your Annuity contract for the maximum Annuity Date, also
described above.
PARTIAL ANNUITIZATION
Effective January 1, 2011, an individual may partially annuitize their
non-qualified annuity if the contract so permits. The Small Business Jobs Act
of 2010 included a provision which allows for a portion of a non-qualified
annuity, endowment or life insurance contract to be annuitized while the
balance is not annuitized. The annuitized portion must be paid out over 10 or
more years or over the lives of one or more individuals. The annuitized
portion of the contract is treated as a separate contract for purposes of
determining taxability of the payments under IRC section 72. We do not
currently permit partial annuitization.
MEDICARE TAX ON NET INVESTMENT INCOME
The Patient Protection and Affordable Care Act, also known as the 2010 Health
Care Act, included a new Medicare tax on investment income. This new tax,
which is effective in 2013, assesses a 3.8% surtax on the lesser of (1) net
investment income or (2) the excess of "modified adjusted gross income" over a
threshold amount. The "threshold amount" is $250,000 for married taxpayers
filing jointly, $125,000 for married taxpayers filing separately, $200,000 for
single taxpayers, and approximately $12,000 for trusts. The taxable portion of
payments received as a withdrawal, surrender, annuity payment, death benefit
payment or any other actual or deemed distribution under the contract will be
considered investment income for purposes of this surtax.
TAX PENALTY FOR EARLY WITHDRAWAL FROM A NONQUALIFIED ANNUITY CONTRACT
You may owe a 10% tax penalty on the taxable part of distributions received
from your Nonqualified Annuity contract before you attain age 59 1/2. Amounts
are not subject to this tax penalty if:
.. the amount is paid on or after you reach age 59 1/2 or die;
.. the amount received is attributable to your becoming disabled;
.. generally the amount paid or received is in the form of substantially equal
payments (as defined in the Code) not less frequently than annually (please
note that substantially equal payments must continue until the later of
reaching age 59 1/2 or 5 years and modification of payments during that
time period will result in retroactive application of the 10% tax penalty);
or
.. the amount received is paid under an immediate annuity contract (in which
annuity payments begin within one year of purchase).
Other exceptions to this tax may apply. You should consult your tax advisor
for further details.
SPECIAL RULES IN RELATION TO TAX-FREE EXCHANGES UNDER SECTION 1035
Section 1035 of the Code permits certain tax-free exchanges of a life
insurance, annuity or endowment contract for an annuity, including tax-free
exchanges of annuity death benefits for a Beneficiary Annuity. Partial
surrenders may be treated in the same way as tax-free 1035 exchanges of entire
contracts, therefore avoiding current taxation of the partially exchanged
amount as well as the 10% tax penalty on pre-age 59 1/2 withdrawals. In
Revenue Procedure 2011-38, the IRS has indicated that, for exchanges on or
after October 24, 2011, where there is a surrender or distribution from either
the initial annuity contract or receiving annuity contract within 180 days of
the date on which the partial exchange was completed, the IRS will apply
general tax rules to determine the substance and treatment of the original
transfer. For partial exchanges that occurred prior to October 24, 2011, the
provisions of Revenue Procedure 2008-24 will continue to apply if there is a
surrender or distribution within 12 months of the date on which the partial
exchange was completed. Under Revenue Procedure 2008-24, the transfer will
retroactively be treated as a taxable distribution from the initial annuity
contract and a contribution to the receiving annuity contract. Tax free
exchange treatment will be retained under certain circumstances if you are
eligible for an exception to the 10% federal income tax penalty, other than
the exceptions for substantially equal periodic payments or distributions
under an immediate annuity. We strongly urge you to discuss any transaction of
this type with your tax advisor before proceeding with the transaction.
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If an Annuity is purchased through a tax-free exchange of a life insurance,
annuity or endowment contract that was purchased prior to August 14, 1982,
then any Purchase Payments made to the original contract prior to August 14,
1982 will be treated as made to the new contract prior to that date.
Generally, such pre-August 14, 1982 withdrawals are treated as a recovery of
your investment in the contract first until Purchase Payments made before
August 14, 1982 are withdrawn. Moreover, income allocable to Purchase Payments
made before August 14, 1982, is not subject to the 10% tax penalty.
TAXES PAYABLE BY BENEFICIARIES
The Death Benefit options are subject to ordinary income tax to the extent the
distribution exceeds the cost basis in the contract. The value of the Death
Benefit, as determined under federal law, is also included in the Owner's
estate for federal estate tax purposes. Generally, the same tax rules
described above would also apply to amounts received by your Beneficiary.
Choosing an option other than a lump sum Death Benefit may defer taxes.
Certain minimum distribution requirements apply upon your death, as discussed
further below in the Annuity Qualification section. Tax consequences to the
Beneficiary vary depending upon the Death Benefit payment option selected.
Generally, for payment of the Death Benefit
.. As a lump sum payment: the Beneficiary is taxed in the year of payment on
gain in the contract.
.. Within 5 years of death of Owner: the Beneficiary is taxed as amounts are
withdrawn (in this case gain is treated as being distributed first).
.. Under an annuity or annuity settlement option with distribution beginning
within one year of the date of death of the Owner: the Beneficiary is taxed
on each payment (part will be treated as gain and part as return of
Purchase Payments).
CONSIDERATIONS FOR CONTINGENT ANNUITANTS: We may allow the naming of a
contingent Annuitant when a Nonqualified Annuity contract is held by a pension
plan or a tax favored retirement plan, or held by a Custodial Account (as
defined earlier in this prospectus). In such a situation, the Annuity may no
longer qualify for tax deferral where the Annuity contract continues after the
death of the Annuitant. However, tax deferral should be provided instead by
the pension plan, tax favored retirement plan, or Custodial Account. We may
also allow the naming of a contingent annuitant when a Nonqualified Annuity
contract is held by an entity owner when such contracts do not qualify for tax
deferral under the current tax law. This does not supersede any benefit
language which may restrict the use of the contingent annuitant.
REPORTING AND WITHHOLDING ON DISTRIBUTIONS
Taxable amounts distributed from an Annuity are subject to federal and state
income tax reporting and withholding. In general, we will withhold federal
income tax from the taxable portion of such distribution based on the type of
distribution. In the case of an annuity or similar periodic payment, we will
withhold as if you are a married individual with three (3) exemptions unless
you designate a different withholding status. If no U.S. taxpayer
identification number is provided, we will automatically withhold using single
with zero exemptions as the default. In the case of all other distributions,
we will withhold at a 10% rate. You may generally elect not to have tax
withheld from your payments. An election out of withholding must be made on
forms that we provide. If you are a U.S. person (including resident alien),
and your address of record is a non-U.S. address, we are required to withhold
income tax unless you provide us with a U.S. residential address.
State income tax withholding rules vary and we will withhold based on the
rules of your State of residence. Special tax rules apply to withholding for
nonresident aliens, and we generally withhold income tax for nonresident
aliens at a 30% rate. A different withholding rate may be applicable to a
nonresident alien based on the terms of an existing income tax treaty between
the United States and the nonresident alien's country. Please refer to the
discussion below regarding withholding rules for a Qualified Annuity.
Regardless of the amount withheld by us, you are liable for payment of federal
and state income tax on the taxable portion of annuity distributions. You
should consult with your tax advisor regarding the payment of the correct
amount of these income taxes and potential liability if you fail to pay such
taxes.
ENTITY OWNERS
Where a contract is held by a non-natural person (e.g. a corporation), other
than as an agent or nominee for a natural person (or in other limited
circumstances), the contract will not be taxed as an annuity and increases in
the value of the contract over its cost basis will be subject to tax annually.
Where a contract is issued to a Charitable Remainder Trust (CRT), the contract
will not be taxed as an annuity and increases in the value of the contract
over its cost basis will be subject to tax annually. As there are charges for
the living benefits described elsewhere in this prospectus, and such charges
reduce the contract value of the Annuity, trustees of the CRT should discuss
with their legal advisors whether election of such living benefits violates
their fiduciary duty to the remainder beneficiary.
Where a contract is issued to a trust, and such trust is characterized as a
grantor trust under the Code, such contract shall not be considered to be held
by a non-natural person and will be subject to the tax reporting and
withholding requirements generally applicable to a Nonqualified Annuity. At
this time, we will not issue Annuities to grantor trusts with multiple
grantors.
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At this time, we will not issue an Annuity to a grantor trust where the
Grantor is not also the Annuitant. Where a previously issued contract was
structured so that it is owned by a grantor trust but the Annuitant is not the
grantor, then the contract is required to terminate upon the death of the
grantor of the trust if the grantor pre-deceases the Annuitant under Section
72(s) of the Code. Under this circumstance, the contract value will be paid
out to the Beneficiary and it is not eligible for the death benefit provided
under the contract.
ANNUITY QUALIFICATION
Diversification And Investor Control. In order to qualify for the tax rules
applicable to annuity contracts described above, the assets underlying the
Sub-accounts of an Annuity must be diversified, according to certain rules
under the Internal Revenue Code. Each portfolio is required to diversify its
investments each quarter so that no more than 55% of the value of its assets
is represented by any one investment, no more than 70% is represented by any
two investments, no more than 80% is represented by any three investments, and
no more than 90% is represented by any four investments. Generally, securities
of a single issuer are treated as one investment and obligations of each U.S.
Government agency and instrumentality (such as the Government National
Mortgage Association) are treated as issued by separate issuers. In addition,
any security issued, guaranteed or insured (to the extent so guaranteed or
insured) by the United States or an instrumentality of the U.S. will be
treated as a security issued by the U.S. Government or its instrumentality,
where applicable. We believe the Portfolios underlying the variable Investment
Options of the Annuity meet these diversification requirements.
An additional requirement for qualification for the tax treatment described
above is that we, and not you as the contract Owner, must have sufficient
control over the underlying assets to be treated as the Owner of the
underlying assets for tax purposes. While we also believe these investor
control rules will be met, the Treasury Department may promulgate guidelines
under which a variable annuity will not be treated as an annuity for tax
purposes if persons with ownership rights have excessive control over the
investments underlying such variable annuity. It is unclear whether such
guidelines, if in fact promulgated, would have retroactive effect. It is also
unclear what effect, if any, such guidelines might have on transfers between
the Investment Options offered pursuant to this prospectus. We reserve the
right to take any action, including modifications to your Annuity or the
Investment Options, required to comply with such guidelines if promulgated.
Any such changes will apply uniformly to affected Owners and will be made with
such notice to affected Owners as is feasible under the circumstances.
Required Distributions Upon Your Death for Nonqualified Annuity Contracts.
Upon your death, certain distributions must be made under the contract. The
required distributions depend on whether you die before you start taking
annuity payments under the contract or after you start taking annuity payments
under the contract. If you die on or after the Annuity Date, the remaining
portion of the interest in the contract must be distributed at least as
rapidly as under the method of distribution being used as of the date of
death. If you die before the Annuity Date, the entire interest in the contract
must be distributed within 5 years after the date of death, or as periodic
payments over a period not extending beyond the life or life expectancy of the
designated Beneficiary (provided such payments begin within one year of your
death). Your designated Beneficiary is the person to whom benefit rights under
the contract pass by reason of death, and must be a natural person in order to
elect a periodic payment option based on life expectancy or a period exceeding
five years. Additionally, if the Annuity is payable to (or for the benefit of)
your surviving spouse, that portion of the contract may be continued with your
spouse as the Owner. For Nonqualified annuity contracts owned by a non-natural
person, the required distribution rules apply upon the death of the Annuitant.
This means that for a contract held by a non-natural person (such as a trust)
for which there is named a co-annuitant, then such required distributions will
be triggered by the death of the first co-annuitants to die.
Changes In Your Annuity. We reserve the right to make any changes we deem
necessary to assure that your Annuity qualifies as an annuity contract for tax
purposes. Any such changes will apply to all contract Owners and you will be
given notice to the extent feasible under the circumstances.
QUALIFIED ANNUITY CONTRACTS
IN GENERAL, AS USED IN THIS PROSPECTUS, A QUALIFIED ANNUITY IS AN ANNUITY
CONTRACT WITH APPLICABLE ENDORSEMENTS FOR A TAX-FAVORED PLAN OR A NONQUALIFIED
ANNUITY CONTRACT HELD BY A TAX-FAVORED RETIREMENT PLAN.
The following is a general discussion of the tax considerations for Qualified
Annuity contracts. This Annuity may or may not be available for all types of
the tax-favored retirement plans discussed below. This discussion assumes that
you have satisfied the eligibility requirements for any tax-favored retirement
plan. Please consult your Financial Professional prior to purchase to confirm
if this contract is available for a particular type of tax-favored retirement
plan or whether we will accept the type of contribution you intend for this
contract.
A Qualified annuity may typically be purchased for use in connection with:
.. Individual retirement accounts and annuities (IRAs), including inherited
IRAs (which we refer to as a Beneficiary IRA), which are subject to
Sections 408(a) and 408(b) of the Code;
.. Roth IRAs, including inherited Roth IRAs (which we refer to as a
Beneficiary Roth IRA) under Section 408A of the Code;
.. A corporate Pension or Profit-sharing plan (subject to 401(a) of the Code);
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.. H.R. 10 plans (also known as Keogh Plans, subject to 401(a) of the Code)
.. Tax Sheltered Annuities (subject to 403(b) of the Code, also known as Tax
Deferred Annuities or TDAs);
.. Section 457 plans (subject to 457 of the Code).
A Nonqualified annuity may also be purchased by a 401(a) trust or custodial
IRA or Roth IRA account, or a Section 457 plan, which can hold other
permissible assets. The terms and administration of the trust or custodial
account or plan in accordance with the laws and regulations for 401(a) plans,
IRAs or Roth IRAs, or a Section 457 plan, as applicable, are the
responsibility of the applicable trustee or custodian.
You should be aware that tax favored plans such as IRAs generally provide
income tax deferral regardless of whether they invest in annuity contracts.
This means that when a tax favored plan invests in an annuity contract, it
generally does not result in any additional tax benefits (such as income tax
deferral and income tax free transfers).
TYPES OF TAX-FAVORED PLANS
IRAS. If you buy an Annuity for use as an IRA, we will provide you a copy of
the prospectus and contract. The "IRA Disclosure Statement" and "Roth IRA
Disclosure Statement" which accompany the prospectus contain information about
eligibility, contribution limits, tax particulars, and other IRA information.
In addition to this information (some of which is summarized below), the IRS
requires that you have a "Free Look" after making an initial contribution to
the contract. During this time, you can cancel the Annuity by notifying us in
writing, and we will refund all of the Purchase Payments under the Annuity
(or, if provided by applicable state law, the amount credited under the
Annuity, if greater), less any applicable federal and state income tax
withholding.
Contributions Limits/Rollovers. Subject to the minimum Purchase Payment
requirements of an Annuity, you may purchase an Annuity for an IRA in
connection with a "rollover" of amounts from a qualified retirement plan, as a
transfer from another IRA, by making a contribution consisting of your IRA
contributions and catch-up contributions, if applicable, attributable to the
prior year during the period from January 1 to April 15 (or the applicable due
date of your federal income tax return, without extension), or as a current
year contribution. In 2012 the contribution limit is $5,000. The contribution
amount is indexed for inflation. The tax law also provides for a catch-up
provision for individuals who are age 50 and above, allowing these individuals
an additional $1,000 contribution each year. The catch-up amount is not
indexed for inflation.
The "rollover" rules under the Code are fairly technical; however, an
individual (or his or her surviving spouse) may generally "roll over" certain
distributions from tax favored retirement plans (either directly or within 60
days from the date of these distributions) if he or she meets the requirements
for distribution. Once you buy an Annuity, you can make regular IRA
contributions under the Annuity (to the extent permitted by law). However, if
you make such regular IRA contributions, you should note that you will not be
able to treat the contract as a "conduit IRA," which means that you will not
retain possible favorable tax treatment if you subsequently "roll over" the
contract funds originally derived from a qualified retirement plan or TDA into
another Section 401(a) plan or TDA.
In some circumstances, non-spouse Beneficiaries may roll over to an IRA
amounts due from qualified plans, 403(b) plans, and governmental 457(b) plans.
However, the rollover rules applicable to non-spouse Beneficiaries under the
Code are more restrictive than the rollover rules applicable to
Owner/participants and spouse Beneficiaries. Generally, non-spouse
Beneficiaries may roll over distributions from tax favored retirement plans
only as a direct rollover, and if permitted by the plan. Under the Worker,
Retiree and Employer Recovery Act of 2008, employer retirement plans are
required to permit non-spouse Beneficiaries to roll over funds to an inherited
IRA for plan years beginning after December 31, 2009. An inherited IRA must be
directly rolled over from the employer plan or transferred from an IRA and
must be titled in the name of the deceased (i.e., John Doe deceased for the
benefit of Jane Doe). No additional contributions can be made to an inherited
IRA. In this prospectus, an inherited IRA is also referred to as a Beneficiary
Annuity.
Required Provisions. Contracts that are IRAs (or endorsements that are part of
the contract) must contain certain provisions:
.. You, as Owner of the contract, must be the "Annuitant" under the contract
(except in certain cases involving the division of property under a decree
of divorce);
.. Your rights as Owner are non-forfeitable;
.. You cannot sell, assign or pledge the contract;
.. The annual contribution you pay cannot be greater than the maximum amount
allowed by law, including catch-up contributions if applicable (which does
not include any rollover amounts);
.. The date on which required minimum distributions must begin cannot be later
than April 1/st/ of the calendar year after the calendar year you turn age
70 1/2; and
.. Death and annuity payments must meet "required minimum distribution" rules
described below.
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Usually, the full amount of any distribution from an IRA (including a
distribution from this contract) which is not a rollover is taxable. As
taxable income, these distributions are subject to the general tax withholding
rules described earlier regarding a Nonqualified Annuity. In addition to this
normal tax liability, you may also be liable for the following, depending on
your actions:
.. A 10% early withdrawal penalty described below;
.. Liability for "prohibited transactions" if you, for example, borrow against
the value of an IRA; or
.. Failure to take a required minimum distribution, also described below.
SEPs. SEPs are a variation on a standard IRA, and contracts issued to a SEP
must satisfy the same general requirements described under IRAs (above). There
are, however, some differences:
.. If you participate in a SEP, you generally do not include in income any
employer contributions made to the SEP on your behalf up to the lesser of
(a) $50,000 in 2012 ($49,000 in 2011) or (b) 25% of your taxable
compensation paid by the contributing employer (not including the
employer's SEP contribution as compensation for these purposes). However,
for these purposes, compensation in excess of certain limits established by
the IRS will not be considered. In 2012, this limit is $250,000 ($245,000
for 2011);
.. SEPs must satisfy certain participation and nondiscrimination requirements
not generally applicable to IRAs; and
.. SEPs that contain a salary reduction or "SARSEP" provision prior to 1997
may permit salary deferrals up to $17,000 in 2012 with the employer making
these contributions to the SEP. However, no new "salary reduction" or
"SARSEPs" can be established after 1996. Individuals participating in a
SARSEP who are age 50 or above by the end of the year will be permitted to
contribute an additional $5,500 in 2012. These amounts are indexed for
inflation. Not all Annuities issued by us are available for SARSEPs. You
will also be provided the same information, and have the same "Free Look"
period, as you would have if you purchased the contract for a standard IRA.
ROTH IRAs. The "Roth IRA Disclosure Statement" contains information about
eligibility, contribution limits, tax particulars and other Roth IRA
information. Like standard IRAs, income within a Roth IRA accumulates
tax-free, and contributions are subject to specific limits. Roth IRAs have,
however, the following differences:
.. Contributions to a Roth IRA cannot be deducted from your gross income;
.. "Qualified distributions" from a Roth IRA are excludable from gross income.
A "qualified distribution" is a distribution that satisfies two
requirements: (1) the distribution must be made (a) after the Owner of the
IRA attains age 59 1/2; (b) after the Owner's death; (c) due to the Owner's
disability; or (d) for a qualified first time homebuyer distribution within
the meaning of Section 72(t)(2)(F) of the Code; and (2) the distribution
must be made in the year that is at least five tax years after the first
year for which a contribution was made to any Roth IRA established for the
Owner or five years after a rollover, transfer, or conversion was made from
a traditional IRA to a Roth IRA. Distributions from a Roth IRA that are not
qualified distributions will be treated as made first from contributions
and then from earnings and earnings will be taxed generally in the same
manner as distributions from a traditional IRA.
.. If eligible (including meeting income limitations and earnings
requirements), you may make contributions to a Roth IRA after attaining age
70 1/2, and distributions are not required to begin upon attaining such age
or at any time thereafter.
Subject to the minimum Purchase Payment requirements of an Annuity, you may
purchase an Annuity for a Roth IRA in connection with a "rollover" of amounts
of another traditional IRA, SEP, SIMPLE-IRA, employer sponsored retirement
plan (under sections 401(a) or 403(b) of the Code) or Roth IRA; or, if you
meet certain income limitations, by making a contribution consisting of your
Roth IRA contributions and catch-up contributions, if applicable, attributable
to the prior year during the period from January 1 to April 15 (or the
applicable due date of your federal income tax return, without extension), or
as a current year contribution. The Code permits persons who receive certain
qualifying distributions from such non-Roth IRAs, to directly rollover or
make, within 60 days, a "rollover" of all or any part of the amount of such
distribution to a Roth IRA which they establish. The conversion of non-Roth
accounts triggers current taxation (but is not subject to a 10% early
distribution penalty). Once an Annuity has been purchased, regular Roth IRA
contributions will be accepted to the extent permitted by law. In addition, an
individual receiving an eligible rollover distribution from a designated Roth
account under an employer plan may roll over the distribution to a Roth IRA
even if the individual is not eligible to make regular contributions to a Roth
IRA. Non-spouse Beneficiaries receiving a distribution from an employer
sponsored retirement plan under sections 401(a) or 403(b) of the Code can also
directly roll over contributions to a Roth IRA. However, it is our
understanding of the Code that non-spouse Beneficiaries cannot "rollover"
benefits from a traditional IRA to a Roth IRA.
TDAs. In general, you may own a Tax Deferred Annuity (also known as a TDA, Tax
Sheltered Annuity (TSA), 403(b) plan or 403(b) annuity) if you are an employee
of a tax-exempt organization (as defined under Code Section 501(c)(3)) or a
public educational organization, and you may make contributions to a TDA so
long as your employer maintains such a plan and your rights to the annuity are
non-forfeitable. Contributions to a TDA, and any earnings, are not taxable
until distribution. You may also make contributions to a TDA under a salary
reduction agreement, generally up to a maximum of $17,000 in 2012. Individuals
participating in a TDA who are age 50 or above by the end of the year will be
permitted to contribute an additional $5,500 in 2012. This amount is indexed
for inflation. Further, you may roll over TDA amounts to another TDA or an
IRA. You may also roll over TDA amounts to a qualified retirement plan, a SEP
and a 457 government plan. A contract may generally only qualify as a TDA if
distributions of salary deferrals (other than "grandfathered" amounts held as
of December 31, 1988) may be made only on account of:
.. Your attainment of age 59 1/2;
.. Your severance of employment;
.. Your death;
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.. Your total and permanent disability; or
.. Hardship (under limited circumstances, and only related to salary
deferrals, not including earnings attributable to these amounts).
In any event, you must begin receiving distributions from your TDA by April
1/st/ of the calendar year after the calendar year you turn age 70 1/2 or
retire, whichever is later. These distribution limits do not apply either to
transfers or exchanges of investments under the contract, or to any "direct
transfer" of your interest in the contract to another employer's TDA plan or
mutual fund "custodial account" described under Code Section 403(b)(7).
Employer contributions to TDAs are subject to the same general contribution,
nondiscrimination, and minimum participation rules applicable to "qualified"
retirement plans.
CAUTION: Under IRS regulations we can accept contributions, transfers and
rollovers only if we have entered into an information-sharing agreement, or
its functional equivalent, with the applicable employer or its agent. In
addition, in order to comply with the regulations, we will only process
certain transactions (e.g., transfers, withdrawals, hardship distributions
and, if applicable, loans) with employer approval. This means that if you
request one of these transactions we will not consider your request to be in
Good Order, and will not therefore process the transaction, until we receive
the employer's approval in written or electronic form.
REQUIRED MINIMUM DISTRIBUTIONS AND PAYMENT OPTIONS
If you hold the contract under an IRA (or other tax-favored plan), required
minimum distribution rules must be satisfied. This means that generally
payments must start by April 1 of the year after the year you reach age 70 1/2
and must be made for each year thereafter. For a TDA or a 401(a) plan for
which the participant is not a greater than 5% Owner of the employer, this
required beginning date can generally be deferred to retirement, if later.
Roth IRAs are not subject to these rules during the Owner's lifetime. The
amount of the payment must at least equal the minimum required under the IRS
rules. Several choices are available for calculating the minimum amount. More
information on the mechanics of this calculation is available on request.
Please contact us at a reasonable time before the IRS deadline so that a
timely distribution is made. Please note that there is a 50% tax penalty on
the amount of any required minimum distribution not made in a timely manner.
Required minimum distributions are calculated based on the sum of the Account
Value and the actuarial value of any additional living and death benefits from
optional riders that you have purchased under the contract. As a result, the
required minimum distributions may be larger than if the calculation were
based on the Account Value only, which may in turn result in an earlier (but
not before the required beginning date) distribution of amounts under the
Annuity and an increased amount of taxable income distributed to the Annuity
Owner, and a reduction of payments under the living and death benefit optional
riders.
You can use the Minimum Distribution option to satisfy the required minimum
distribution rules for an Annuity without either beginning annuity payments or
surrendering the Annuity. We will distribute to you the required minimum
distribution amount, less any other partial withdrawals that you made during
the year. Such amount will be based on the value of the contract as of
December 31 of the prior year, but is determined without regard to other
contracts you may own.
Although the IRS rules determine the required amount to be distributed from
your IRA each year, certain payment alternatives are still available to you.
If you own more than one IRA, you can choose to satisfy your minimum
distribution requirement for each of your IRAs by withdrawing that amount from
any of your IRAs. If you inherit more than one IRA or more than one Roth IRA
from the same Owner, similar rules apply.
CHARITABLE IRA DISTRIBUTIONS. The Pension Protection Act of 2006 included a
charitable giving incentive permitting tax-free IRA distributions for
charitable purposes. The Tax Relief, Unemployment Insurance Reauthorization,
and Job Creation Act of 2010 extended this provision until the end of 2011. As
of 2012, this provision expired and has not been extended. It is possible
Congress will extend this provision retroactively to include some or all of
2012.
For distributions in tax years beginning after 2005 and before 2012, the Act
provides an exclusion from gross income, up to $100,000 for otherwise taxable
IRA distributions from a traditional or Roth IRA that are qualified charitable
distributions. To constitute a qualified charitable distribution, the
distribution must be made (1) directly by the IRA trustee to certain qualified
charitable organizations and (2) on or after the date the IRA owner attains
age 70 1/2. Distributions that are excluded from income under this provision
are not taken into account in determining the individual's deductions, if any,
for charitable contributions.
The IRS has indicated that an IRA trustee is not responsible for determining
whether a distribution to a charity is one that satisfies the requirements for
the new income tax exclusion added by the Pension Protection Act. As a result
the general rules for reporting IRA distributions apply.
REQUIRED DISTRIBUTIONS UPON YOUR DEATH FOR QUALIFIED ANNUITY CONTRACTS
Upon your death under an IRA, Roth IRA, 403(b) or other employer sponsored
plan, the designated Beneficiary may generally elect to continue the contract
and receive required minimum distributions under the contract instead of
receiving the death benefit in a single payment. The available payment options
will depend on whether you die before the date required minimum distributions
under the Code were to begin, whether you have named a designated Beneficiary
and whether that Beneficiary is your surviving spouse.
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.. If you die after a designated Beneficiary has been named, the death benefit
must be distributed by December 31/st/ of the year including the five year
anniversary of the date of death, or as periodic payments not extending
beyond the life or life expectancy of the designated Beneficiary (as long
as payments begin by December 31/st/ of the year following the year of
death). However, if your surviving spouse is the Beneficiary, the death
benefit can be paid out over the life or life expectancy of your spouse
with such payments beginning no later than December 31/st/ of the year
following the year of death or December 31/st/ of the year in which you
would have reached age 70 1/2, which ever is later. Additionally, if the
contract is payable to (or for the benefit of) your surviving spouse, as
sole primary beneficiary, the contract may be continued with your spouse as
the Owner.
.. If you die before a designated Beneficiary is named and before the date
required minimum distributions must begin under the Code, the death benefit
must be paid out by December 31/st/ of the year including the five year
anniversary of the date of death. For contracts where multiple
Beneficiaries have been named and at least one of the Beneficiaries does
not qualify as a designated Beneficiary and the account has not been
divided into separate accounts by December 31/st/ of the year following the
year of death, such contract is deemed to have no designated Beneficiary. A
designated Beneficiary may elect to apply the rules for no designated
Beneficiary if those would provide a smaller payment requirement.
.. If you die before a designated Beneficiary is named and after the date
required minimum distributions must begin under the Code, the death benefit
must be paid out at least as rapidly as under the method then in effect.
For contracts where multiple Beneficiaries have been named and at least one
of the Beneficiaries does not qualify as a designated Beneficiary and the
account has not been divided into separate accounts by December 31/st/ of
the year following the year of death, such contract is deemed to have no
designated Beneficiary. A designated Beneficiary may elect to apply the
rules for no designated Beneficiary if those would provide a smaller
payment requirement.
A Beneficiary has the flexibility to take out more each year than mandated
under the required minimum distribution rules.
Until withdrawn, amounts in a Qualified Annuity contract continue to be tax
deferred. Amounts withdrawn each year, including amounts that are required to
be withdrawn under the required minimum distribution rules, are subject to
tax. You may wish to consult a professional tax advisor for tax advice as to
your particular situation.
For a Roth IRA, if death occurs before the entire interest is distributed, the
death benefit must be distributed under the same rules applied to IRAs where
death occurs before the date required minimum distributions must begin under
the Code.
TAX PENALTY FOR EARLY WITHDRAWALS FROM QUALIFIED ANNUITY CONTRACTS
You may owe a 10% tax penalty on the taxable part of distributions received
from an IRA, SEP, Roth IRA, TDA or qualified retirement plan before you attain
age 59 1/2. Amounts are not subject to this tax penalty if:
.. the amount is paid on or after you reach age 59 1/2 or die;
.. the amount received is attributable to your becoming disabled; or
.. generally the amount paid or received is in the form of substantially equal
payments (as defined in the Code) not less frequently than annually.
(Please note that substantially equal payments must continue until the
later of reaching age 59 1/2 or 5 years. Modification of payments or
additional contributions to the contract during that time period will
result in retroactive application of the 10% tax penalty.)
Other exceptions to this tax may apply. You should consult your tax advisor
for further details.
WITHHOLDING
We will withhold federal income tax at the rate of 20% for any eligible
rollover distribution paid by us to or for a plan participant, unless such
distribution is "directly" rolled over into another qualified plan, IRA
(including the IRA variations described above), SEP, 457 government plan or
TDA. An eligible rollover distribution is defined under the tax law as a
distribution from an employer plan under 401(a), a TDA or a 457 governmental
plan, excluding any distribution that is part of a series of substantially
equal payments (at least annually) made over the life expectancy of the
employee or the joint life expectancies of the employee and his designated
Beneficiary, any distribution made for a specified period of 10 years or more,
any distribution that is a required minimum distribution and any hardship
distribution. Regulations also specify certain other items which are not
considered eligible rollover distributions. We will not withhold for payments
made from trustee owned contracts or for payments under a 457 plan. For all
other distributions, unless you elect otherwise, we will withhold federal
income tax from the taxable portion of such distribution at an appropriate
percentage. The rate of withholding on annuity payments where no mandatory
withholding is required is determined on the basis of the withholding
certificate that you file with us. If you do not file a certificate, we will
automatically withhold federal taxes on the following basis:
.. For any annuity payments not subject to mandatory withholding, you will
have taxes withheld by us as if you are a married individual, with 3
exemptions
.. If no U.S. taxpayer identification number is provided, we will
automatically withhold using single with zero exemptions as the default; and
.. For all other distributions, we will withhold at a 10% rate.
We will provide you with forms and instructions concerning the right to elect
that no amount be withheld from payments in the ordinary course. However, you
should know that, in any event, you are liable for payment of federal income
taxes on the taxable
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portion of the distributions, and you should consult with your tax advisor to
find out more information on your potential liability if you fail to pay such
taxes. There may be additional state income tax withholding requirements.
ERISA REQUIREMENTS
ERISA (the "Employee Retirement Income Security Act of 1974") and the Code
prevent a fiduciary and other "parties in interest" with respect to a plan
(and, for these purposes, an IRA would also constitute a "plan") from
receiving any benefit from any party dealing with the plan, as a result of the
sale of the contract. Administrative exemptions under ERISA generally permit
the sale of insurance/annuity products to plans, provided that certain
information is disclosed to the person purchasing the contract. This
information has to do primarily with the fees, charges, discounts and other
costs related to the contract, as well as any commissions paid to any agent
selling the contract. Information about any applicable fees, charges,
discounts, penalties or adjustments may be found in the applicable sections of
this prospectus. Information about sales representatives and commissions may
be found in the sections of this prospectus addressing distribution of the
Annuities.
Other relevant information required by the exemptions is contained in the
contract and accompanying documentation.
Please consult with your tax advisor if you have any questions about ERISA and
these disclosure requirements.
SPOUSAL CONSENT RULES FOR RETIREMENT PLANS - QUALIFIED CONTRACTS
If you are married at the time your payments commence, you may be required by
federal law to choose an income option that provides survivor annuity income
to your spouse, unless your spouse waives that right. Similarly, if you are
married at the time of your death, federal law may require all or a portion of
the Death Benefit to be paid to your spouse, even if you designated someone
else as your Beneficiary. A brief explanation of the applicable rules follows.
For more information, consult the terms of your retirement arrangement.
Defined Benefit Plans and Money Purchase Pension Plans. If you are married at
the time your payments commence, federal law requires that benefits be paid to
you in the form of a "qualified joint and survivor annuity" (QJSA), unless you
and your spouse waive that right, in writing. Generally, this means that you
will receive a reduced payment during your life and, upon your death, your
spouse will receive at least one-half of what you were receiving for life. You
may elect to receive another income option if your spouse consents to the
election and waives his or her right to receive the QJSA. If your spouse
consents to the alternative form of payment, your spouse may not receive any
benefits from the plan upon your death. Federal law also requires that the
plan pay a Death Benefit to your spouse if you are married and die before you
begin receiving your benefit. This benefit must be available in the form of an
annuity for your spouse's lifetime and is called a "qualified pre-retirement
survivor annuity" (QPSA). If the plan pays Death Benefits to other
Beneficiaries, you may elect to have a Beneficiary other than your spouse
receive the Death Benefit, but only if your spouse consents to the election
and waives his or her right to receive the QPSA. If your spouse consents to
the alternate Beneficiary, your spouse will receive no benefits from the plan
upon your death. Any QPSA waiver prior to your attaining age 35 will become
null and void on the first day of the calendar year in which you attain age
35, if still employed.
Defined Contribution Plans (including 401(k) Plans and ERISA 403(b)
Annuities). Spousal consent to a distribution is generally not required. Upon
your death, your spouse will receive the entire Death Benefit, even if you
designated someone else as your Beneficiary, unless your spouse consents in
writing to waive this right. Also, if you are married and elect an annuity as
a periodic income option, federal law requires that you receive a QJSA (as
described above), unless you and your spouse consent to waive this right.
IRAs, non-ERISA 403(b) Annuities, and 457 Plans. Spousal consent to a
distribution usually is not required. Upon your death, any Death Benefit will
be paid to your designated Beneficiary.
GIFTS AND GENERATION-SKIPPING TRANSFERS
If you transfer your contract to another person for less than adequate
consideration, there may be gift tax consequences in addition to income tax
consequences. Also, if you transfer your contract to a person two or more
generations younger than you (such as a grandchild or grandniece) or to a
person that is more than 37 1/2 years younger than you, there may be
generation-skipping transfer tax consequences.
ADDITIONAL INFORMATION
For additional information about federal tax law requirements applicable to
IRAs and Roth IRAs, see the IRA Disclosure Statement or Roth IRA Disclosure
Statement, as applicable.
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GENERAL INFORMATION
HOW WILL I RECEIVE STATEMENTS AND REPORTS?
We send any statements and reports required by applicable law or regulation to
you at your last known address of record. You should therefore give us prompt
notice of any address change. We reserve the right, to the extent permitted by
law and subject to your prior consent, to provide any prospectus, prospectus
supplements, confirmations, statements and reports required by applicable law
or regulation to you through our Internet Website at http://www.
prudentialannuities.com or any other electronic means, including diskettes or
CD ROMs. We generally send a confirmation statement to you each time a
financial transaction is made affecting Account Value, such as making
additional Purchase Payments, transfers, exchanges or withdrawals. We may also
send quarterly statements detailing the activity affecting your Annuity during
the calendar quarter. We may confirm regularly scheduled transactions,
including, but not limited to the Annual Maintenance Fee, Systematic
Withdrawals (including 72(t) and 72(q) payments and required minimum
distributions), electronic funds transfer, Dollar Cost Averaging, and static
rebalancing, in quarterly statements instead of confirming them immediately.
You should review the information in these statements carefully. You may
request additional reports or copies of reports previously sent. We reserve
the right to charge up to $50 for each such additional or previously sent
report. We will also send an annual report and a semi-annual report containing
applicable financial statements for the Portfolios to Owners or, with your
prior consent, make such documents available electronically through our
Internet Website or other electronic means.
WHO IS PRUDENTIAL ANNUITIES?
Prudential Annuities Life Assurance Corporation, a Prudential Financial
Company, ("Prudential Annuities") is a stock life insurance company
incorporated under the laws of Connecticut on July 26, 1988 and is domiciled
in Connecticut with licenses in all 50 states, the District of Columbia and
Puerto Rico. Prudential Annuities is a wholly-owned subsidiary of Prudential
Annuities, Inc., whose ultimate parent is Prudential Financial, Inc.
Prudential Annuities markets through and in conjunction with registered
broker-dealers.
Prudential Annuities offers a wide array of annuities, including (1) deferred
variable annuities that are registered with the SEC, including fixed interest
rate annuities that are offered as a companion to certain of our variable
annuities and are registered because of their market value adjustment feature
and (2) fixed annuities that are not registered with the SEC. In addition,
Prudential Annuities has in force a relatively small block of variable life
insurance policies and immediate variable annuities, but it no longer actively
sells such policies.
No company other than Prudential Annuities has any legal responsibility to pay
amounts that it owes under its annuity and variable life insurance contracts.
Among other things, this means that where you participate in an optional
living benefit or death benefit and the value of that benefit (e.g., the
Protected Withdrawal for Highest Daily Lifetime 6 Plus) exceeds your current
Account Value, you would rely solely on the ability of the issuing insurance
company to make payments under the benefit out of its own assets. Prudential
Financial, however, exercises significant influence over the operations and
capital structure of Prudential Annuities.
Prudential Annuities conducts the bulk of its operations through staff
employed by it or by affiliated companies within the Prudential Financial
family. Certain discrete functions have been delegated to non-affiliates that
could be deemed "service providers" under the Investment Company Act of 1940.
The entities engaged by Prudential Annuities may change over time. As of
December 31, 2011, non-affiliated entities that could be deemed service
providers to Prudential Annuities and/or an affiliated insurer within the
Prudential Annuities business unit consisted of the following: Alliance-One
Services Inc. (administration of variable life policies) located at 55
Hartland Street, East Hartford CT 06108, Ascensus (qualified plan
administrator) located at 200 Dryden Road, Dresher, PA 19025, Alerus
Retirement Solutions (qualified plan administrator), State Street Financial
Center One, Lincoln Street, Boston, MA 02111, Aprimo (fulfillment of marketing
materials), 510 East 96/th/ Street, Suite 300, Indianapolis, IN 46240, Aplifi
(order entry systems provider) located at 555 SW 12/th/ Ave, Suite 202,
Pompano Beach, FL 33069, Broadridge Investor Communication Solutions, Inc.
(proxy tabulation services), 51 Mercedes Way, Edgewood, NY 11717, Consona
(maintenance and storage of administrative documents), 333 Allegheny Avenue,
Suite 301 North, Oakmont, PA 15139-2066, Depository Trust & Clearing
Corporation (clearing and settlement services), 55 Water Street, 26/th/ Floor,
New York, NY 10041, DG3 North America, Inc. (proxy and prospectus printing and
mailing services), 100 Burma Road, Jersey City, NJ 07305, DST Systems, Inc.
(clearing and settlement services), 4900 Main, 7/th/ Floor, Kansas City, MO
64112, EBIX, Inc. (order-entry system), 5 Concourse Parkway, Suite 3200,
Atlanta, GA 30328, ExlService Holdings, Inc., (administration of annuity
contracts), 350 Park Avenue, 10/th/ Floor, New York, NY 10022, Diversified
Information Technologies Inc. (records management), 123 Wyoming Avenue,
Scranton, PA 18503, Fiserv (composition, printing and mailing of confirmation
and quarterly statements), 881 Main Street, Manchester, CT 06040, Fosdick
Fulfillment Corp. (fulfillment of prospectuses and marketing materials),
26 Barnes Industrial Park Road, North Wallingford, CT 06492, Insurance
Technologies (annuity illustrations), 38120 Amrhein Ave., Livonia, MI 48150,
Morningstar Associates LLC (asset allocation recommendations) , 225 West
Wacker Drive Chicago, IL 60606, National Financial Services (clearing and
settlement services), NEPS, LLC (composition, printing, and mailing of
contracts and benefit documents), 12 Manor Parkway, Salem, NJ 03079, Pershing
LLC (order-entry systems provider), One Pershing Plaza, Jersey City, NJ 07399,
RR Donnelley Receivables, Inc. (printing annual reports and prospectuses), 111
South Wacker Drive,
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Chicago, IL 60606-4301, Skywire Software (composition, printing, and mailing
of contracts and benefit documents), 150 Post Street, Suite 500,
San Francisco, CA 94108, VG Reed & Sons, Inc. (printing and fulfillment of
annual reports), 1002 South 12/th/ Street, Louisville, KY 40210, William B.
Meyer (printing and fulfillment of prospectuses and marketing materials), 255
Long Beach Boulevard, Stratford, CT 06615, Right Now Technologies (business
information repository), 136 Enterprise Blvd, Bozeman, MT 59718, The Harty
Press (print vendor for client communications), 25 James Street, New Haven, CT
06513.
WHAT ARE SEPARATE ACCOUNTS?
The separate accounts are where Prudential Annuities sets aside and invests
the assets of some of our annuities. These separate accounts were established
under the laws of the State of Connecticut. The assets of each separate
account are held in the name of Prudential Annuities, and legally belong to
us. These assets are kept separate from all our other assets, and may not be
charged with liabilities arising out of any other business we may conduct.
Thus, income, gains and losses from assets allocated to a separate account are
credited to or charged against each such separate account, without regard to
other income, gains, or losses of Prudential Annuities or of any other of our
separate accounts. The obligations under the Annuities are those of Prudential
Annuities, which is the issuer of the Annuities and the depositor of the
separate accounts. More detailed information about Prudential Annuities,
including its audited consolidated financial statements, is provided in the
Statement of Additional Information.
SEPARATE ACCOUNT B
During the accumulation period, the assets supporting obligations based on
allocations to the Sub-accounts are held in Sub-accounts of Prudential
Annuities Life Assurance Corporation Variable Account B, also referred to as
"Separate Account B". Separate Account B was established by us pursuant to
Connecticut law on November 25, 1987. Separate Account B also holds assets of
other annuities issued by us with values and benefits that vary according to
the investment performance of Separate Account B.
Separate Account B consists of multiple Sub-accounts. Each Sub-account invests
only in a single mutual fund or mutual fund portfolio. The name of each
Sub-account generally corresponds to the name of the underlying Portfolio.
Each Sub-account in Separate Account B may have several different Unit Prices
to reflect the Insurance Charge and the charges for any optional benefits that
are offered under this Annuity and other annuities issued by us through
Separate Account B. From November 16, 1993, the date the Annuity was first
available, until June 30, 1994 the annualized expenses charged against the
Sub-accounts under the Annuity totaled 1.90%. This included 1.00% as an
investment allocation services charge and 0.90% for the combination of
mortality and expense risk, as well as administration charges (we refer to
this as the "Insurance Charge"). Starting on July 1, 1994, the 1.00%
investment allocation services charge was no longer assessed, so that the
total annualized charges under the Annuity were 0.90%. As of May 1, 1998 the
total annualized charges were further reduced to 0.65%. Separate Account B is
registered with the SEC under the Investment Company Act of 1940 ("Investment
Company Act") as a unit investment trust, which is a type of investment
company. The SEC does not supervise investment policies, management or
practices of Separate Account B.
We may offer new Sub-accounts, eliminate Sub-accounts, or combine Sub-accounts
at our sole discretion. We may also close Sub-accounts to additional Purchase
Payments on existing Annuities or close Sub-accounts for Annuities purchased
on or after specified dates. We will first notify you and receive any
necessary SEC and/or state approval before making such a change. If an
underlying mutual fund is liquidated, we will ask you to reallocate any amount
in the liquidated fund. If you do not reallocate these amounts, we will
reallocate such amounts only in accordance with SEC pronouncements and only
after obtaining an order from the SEC, if required. If investment in the
Portfolios or a particular Portfolio is no longer possible, in our discretion
becomes inappropriate for purposes the Annuity, or for any other rationale in
our sole judgment, we may substitute another portfolio or investment
portfolios without your consent. The substituted portfolio may have different
fees and expenses. Substitution may be made with respect to existing
investments or the investment of future Purchase Payments, or both. However,
we will not make such substitution without any required approval of the SEC
and any applicable state insurance departments. In addition, we may close
Portfolios to allocation of Purchase Payments or Account Value, or both, at
any time in our sole discretion. We do not control the underlying mutual
funds, so we cannot guarantee that any of those funds will always be available.
If you are enrolled in a Dollar Cost Averaging, Asset Rebalancing, or
comparable programs while an underlying fund merger, substitution or
liquidation takes place, unless otherwise noted in any communication from us,
your Account Value invested in such underlying fund will be transferred
automatically to the designated surviving fund in the case of mergers, the
replacement fund in the case of substitutions, and an available Money Market
Fund in the case of fund liquidations. Your enrollment instructions will be
automatically updated to reflect the surviving fund, the replacement fund or a
Money Market Fund for any continued and future investments.
VALUES AND BENEFITS BASED ON ALLOCATIONS TO THE SUB-ACCOUNTS WILL VARY WITH
THE INVESTMENT PERFORMANCE OF THE UNDERLYING MUTUAL FUNDS OR FUND PORTFOLIOS,
AS APPLICABLE. WE DO NOT GUARANTEE THE INVESTMENT RESULTS OF ANY SUB-ACCOUNT.
YOUR ACCOUNT VALUE ALLOCATED TO THE SUB-ACCOUNTS MAY INCREASE OR DECREASE. YOU
BEAR THE ENTIRE INVESTMENT RISK. THERE IS NO ASSURANCE THAT THE ACCOUNT VALUE
OF YOUR ANNUITY WILL EQUAL OR BE GREATER THAN THE TOTAL OF THE PURCHASE
PAYMENTS YOU MAKE TO US.
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SEPARATE ACCOUNT D
During the accumulation period, assets supporting our obligations based on
Fixed Allocations are held in Prudential Annuities Life Assurance Corporation
Separate Account D, also referred to as "Separate Account D". Such obligations
are based on the fixed interest rates we credit to Fixed Allocations and the
terms of the Annuities. These obligations do not depend on the investment
performance of the assets in Separate Account D. Separate Account D was
established by us pursuant to Connecticut law.
There are no units in Separate Account D. The Fixed Allocations are guaranteed
by our general account. An Annuity Owner who allocates a portion of their
Account Value to Separate Account D does not participate in the investment
gain or loss on assets maintained in Separate Account D. Such gain or loss
accrues solely to us. We retain the risk that the value of the assets in
Separate Account D may drop below the reserves and other liabilities we must
maintain. Should the value of the assets in Separate Account D drop below the
reserve and other liabilities we must maintain in relation to the annuities
supported by such assets, we will transfer assets from our general account to
Separate Account D to make up the difference. We have the right to transfer to
our general account any assets of Separate Account D in excess of such
reserves and other liabilities. We maintain assets in Separate Account D
supporting a number of annuities we offer.
We may employ investment managers to manage the assets maintained in Separate
Account D. Each manager we employ is responsible for investment management of
a different portion of Separate Account D. From time to time additional
investment managers may be employed or investment managers may cease being
employed. We are under no obligation to employ or continue to employ any
investment manager(s) and have sole discretion over the investment managers we
retain.
We are not obligated to invest according to specific guidelines or strategies
except as may be required by Connecticut and other state insurance laws.
WHAT IS THE LEGAL STRUCTURE OF THE UNDERLYING FUNDS?
Each underlying mutual fund is registered as an open-end management investment
company under the Investment Company Act. Shares of the underlying mutual fund
portfolios are sold to separate accounts of life insurance companies offering
variable annuity and variable life insurance products. The shares may also be
sold directly to qualified pension and retirement plans.
VOTING RIGHTS
We are the legal owner of the shares of the underlying mutual funds in which
the Sub-accounts invest. However, under SEC rules, you have voting rights in
relation to Account Value maintained in the Sub-accounts. If an underlying
mutual fund portfolio requests a vote of shareholders, we will vote our shares
based on instructions received from Owners with Account Value allocated to
that Sub-account. Owners have the right to vote an amount equal to the number
of shares attributable to their contracts. If we do not receive voting
instructions in relation to certain shares, we will vote those shares in the
same manner and proportion as the shares for which we have received
instructions. This voting procedure is sometimes referred to as "mirror
voting" because, as indicated in the immediately preceding sentence, we mirror
the votes that are actually cast, rather than decide on our own how to vote.
We will also "mirror vote" shares within the separate account that are owned
directly by us or an affiliate. In addition, because all the shares of a given
mutual fund held within our separate account are legally owned by us, we
intend to vote all of such shares when that underlying fund seeks a vote of
its shareholders. As such, all such shares will be counted towards whether
there is a quorum at the underlying fund's shareholder meeting and towards the
ultimate outcome of the vote. Thus, under "mirror voting", it is possible that
the votes of a small percentage of contract holders who actually vote will
determine the ultimate outcome. We will furnish those Owners who have Account
Value allocated to a Sub-account whose underlying mutual fund portfolio has
requested a "proxy" vote with proxy materials and the necessary forms to
provide us with their voting instructions. Generally, you will be asked to
provide instructions for us to vote on matters such as changes in a
fundamental investment strategy, adoption of a new investment advisory
agreement, or matters relating to the structure of the underlying mutual fund
that require a vote of shareholders.
Advanced Series Trust (the "Trust") has obtained an exemption from the
Securities and Exchange Commission that permits its co-investment advisers,
AST Investment Services, Inc. and Prudential Investments LLC, subject to
approval by the Board of Trustees of the Trust, to change sub-advisors for a
Portfolio and to enter into new sub-advisory agreements, without obtaining
shareholder approval of the changes. This exemption (which is similar to
exemptions granted to other investment companies that are organized in a
similar manner as the Trust) is intended to facilitate the efficient
supervision and management of the sub-advisors by AST Investment Services,
Inc., Prudential Investments LLC and the Trustees. The exemption does not
apply to the AST Franklin Templeton Founding Funds Allocation Portfolio;
shareholder approval of new subadvisory agreements for this Portfolio only is
required. The Trust is required, under the terms of the exemption, to provide
certain information to shareholders following these types of changes. We may
add new Sub-accounts that invest in a series of underlying funds other than
the Trust. Such series of funds may have a similar order from the SEC. You
also should review the prospectuses for the other underlying funds in which
various Sub-accounts invest as to whether they have obtained similar orders
from the SEC.
MATERIAL CONFLICTS
It is possible that differences may occur between companies that offer shares
of an underlying mutual fund portfolio to their respective separate accounts
issuing variable annuities and/or variable life insurance products.
Differences may also occur
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surrounding the offering of an underlying mutual fund portfolio to variable
life insurance policies and variable annuity contracts that we offer. Under
certain circumstances, these differences could be considered "material
conflicts," in which case we would take necessary action to protect persons
with voting rights under our variable annuity contracts and variable life
insurance policies against persons with voting rights under other insurance
companies' variable insurance products. If a "material conflict" were to arise
between owners of variable annuity contracts and variable life insurance
policies issued by us we would take necessary action to treat such persons
equitably in resolving the conflict. "Material conflicts" could arise due to
differences in voting instructions between owners of variable life insurance
and variable annuity contracts of the same or different companies. We monitor
any potential conflicts that may exist.
SERVICE FEES PAYABLE TO PRUDENTIAL ANNUITIES
Prudential Annuities or our affiliates have entered into agreements with the
investment adviser or distributor of the underlying Portfolios. Under the
terms of these agreements, Prudential Annuities, or our affiliates may provide
administrative and support services to the Portfolios for which it receives a
fee of up to 0.55% (currently) of the average assets allocated to the
Portfolios under each Annuity from the investment adviser, distributor and/or
the fund. These agreements may be different for each underlying mutual fund
whose portfolios are offered as Sub-accounts. We expect to make a profit on
these fees.
Prudential Annuities and/or our affiliates receive substantial and varying
administrative service payments, Rule 12b-1 fees, and "revenue sharing"
payments from certain underlying Portfolios or related parties. Rule 12b-1
fees compensate our affiliated principal underwriter for distribution,
marketing, and/or servicing functions. Administrative services payments
compensate us for providing administrative services with respect to Annuity
Owners invested indirectly in the Portfolio, which include duties such as
recordkeeping, shareholder services, and the mailing of periodic reports. We
receive administrative services fees with respect to both affiliated
underlying Portfolios and unaffiliated underlying Portfolios. The
administrative services fees we receive from affiliates originate from the
assets of the affiliated Portfolio itself and/or the assets of the Portfolio's
investment adviser. In recognition of the administrative services provided by
the relevant affiliated insurance companies, the investment advisers to
certain affiliated Portfolios also make "revenue sharing" payments to such
affiliated insurance companies. In any case, the existence of these fees tends
to increase the overall cost of investing in the Portfolio. In addition,
because these fees are paid to us, allocations you make to these affiliated
underlying Portfolios benefit us financially. In addition to the payments that
we receive from underlying funds and/or their affiliates, those same funds
and/or their affiliates may make payments to us and/or other insurers within
the Prudential Financial group related to the offering of investment options
within variable annuities or life insurance offered by different Prudential
business units.
We collect these payments and fees under agreements between us and a
Portfolio's principal underwriter, transfer agent, investment adviser and/or
other entities related to the Portfolio.
The 12b-1 fees and administrative services fees that we receive may vary among
the different fund complexes that are part of our investment platform. Thus,
the fees we collect may be greater or smaller, based on the Portfolios that
you select. In addition, we may consider these payments and fees, among a
number of factors, when deciding to add or keep a Portfolio on the "menu" of
Portfolios that we offer through the Annuity.
In addition, an investment adviser, sub-adviser or distributor of the
underlying Portfolios may also compensate us by providing reimbursement,
defraying the costs of, or paying directly for, among other things, marketing
and/or administrative services and/or other services they provide in
connection with the Annuity. These services may include, but are not limited
to: sponsoring or co-sponsoring various promotional, educational or marketing
meetings and seminars attended by distributors, wholesalers, and/or broker
dealer firms' registered representatives, and creating marketing material
discussing the contract, available options, and underlying Portfolios. The
amounts paid depend on the nature of the meetings, the number of meetings
attended by the adviser, sub-adviser, or distributor, the number of
participants and attendees at the meetings, the costs expected to be incurred,
and the level of the adviser's, sub-adviser's or distributor's participation.
These payments or reimbursements may not be offered by all advisers,
sub-advisers, or distributor and the amounts of such payments may vary between
and among each adviser, sub-adviser and distributor depending on their
respective participation.
During 2011, with regard to amounts that were paid under the kinds of
arrangements described immediately above, the amounts ranged from
approximately $125 to approximately $789,756. These amounts may have been paid
to one or more Prudential-affiliated insurers issuing individual variable
annuities.
WHO DISTRIBUTES ANNUITIES OFFERED BY PRUDENTIAL ANNUITIES?
Prudential Annuities Distributors, Inc. (PAD), a wholly-owned subsidiary of
Prudential Annuities, Inc., is the distributor and principal underwriter of
the Annuities offered through this prospectus. PAD acts as the distributor of
a number of annuity and life insurance products. PAD's principal business
address is One Corporate Drive, Shelton, Connecticut 06484. PAD is registered
as a broker-dealer under the Securities Exchange Act of 1934 (Exchange Act),
and is a member of the Financial Industry Regulatory Authority (FINRA).
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The Annuity is offered on a continuous basis. PAD enters into distribution
agreements with broker-dealers who are registered under the Exchange Act and
with entities that may offer the Annuity but are exempt from registration
("firms"). Applications for the Annuity are solicited by registered
representatives of those firms. In addition, PAD may offer the Annuity
directly to potential purchasers.
Prudential Annuities sells its annuity products through multiple distribution
channels, including (1) independent broker-dealer firms and financial
planners; (2) broker-dealers that are members of the New York Stock Exchange,
including "wirehouse" and regional broker-dealer firms; and (3) broker-dealers
affiliated with banks or that specialize in marketing to customers of banks.
Although we are active in each of those distribution channels, the majority of
our sales have come from the independent broker- dealer firms and financial
planners. On June 1, 2006, The Prudential Insurance Company of America, an
affiliate of Prudential Annuities, acquired the variable annuity business of
The Allstate Corporation ("Allstate"), which included exclusive access to the
Allstate affiliated broker-dealer. We began selling variable annuities through
the Allstate affiliated broker-dealer registered representatives in the third
quarter of 2006 until May 31, 2009.
Under the selling agreements, commissions may be paid based on Account Value.
The maximum commission to be paid in connection with a sale is 0.30% per year
of the Account Value. We may also provide compensation to the distributing
firm for providing ongoing service to you in relation to the Annuity.
Commissions and other compensation paid in relation to the Annuity do not
result in any additional charge to you or to the Separate Account.
In addition, in an effort to promote the sale of our products, (which may
include the placement of Prudential Annuities and/or the Annuity on a
preferred or recommended company or product list and/or access to the firm's
registered representatives) we or PAD may enter into compensation arrangements
with certain broker-dealer firms with respect to certain or all registered
representatives of such firms under which such firms may receive separate
compensation or reimbursement for, among other things, training of sales
personnel, marketing and/or administrative services and/or other services they
provide. These services may include, but are not limited to: educating
customers of the firm on the Annuity's features; conducting due diligence and
analysis, providing office access, operations and systems support; holding
seminars intended to educate the firm's registered representatives and make
them more knowledgeable about the Annuity; providing a dedicated marketing
coordinator; providing priority sales desk support; and providing expedited
marketing compliance approval and preferred programs to PAD. To the extent
permitted by FINRA rules and other applicable laws and regulations, PAD may
pay or allow other promotional incentives or payments in the form of cash or
non-cash compensation. (e.g., gifts, occasional meals and entertainment,
sponsorship of training and due diligence events). These arrangements may not
be offered to all firms and the terms of such arrangements may differ between
firms. In addition, we or our affiliates may provide such compensation,
payments and/or incentives to firms arising out of the marketing, sale and/or
servicing of variable annuities or life insurance offered by different
Prudential business units.
A list of the firms to whom Prudential Annuities pays an amount for these
arrangements is provided below. You should note that firms and individual
registered representatives and branch managers within some firms participating
in one of these compensation arrangements might receive greater compensation
for selling the Annuity than for selling a different annuity that is not
eligible for these compensation arrangements. While compensation is generally
taken into account as an expense in considering the charges applicable to an
annuity product, any such compensation will be paid by us or PAD and will not
result in any additional charge to you. Overall compensation paid to the
distributing firm does not exceed, based on actuarial assumptions, 8.5% of the
total Purchase Payments made. Your registered representative can provide you
with more information about the compensation arrangements that apply upon the
sale of the Annuity. Further information about the firms that are part of
these compensation arrangements appears in the Statement of Additional
Information, which is available without charge upon request.
We or PAD also may compensate third-party vendors, for services that such
vendors render to broker-dealer firms. To the extent permitted by the FINRA
rules and other applicable laws and regulations, PAD may pay or allow other
promotional incentives or payments in the forms of cash or non-cash
compensation. These arrangements may not be offered to all firms and the terms
of such arrangements may differ between firms.
The list below identifies three general types of payments that PAD pays which
are broadly defined as follows:
. Percentage Payments based upon "Assets under Management" or "AUM": This
type of payment is a percentage payment that is based upon assets,
subject to certain criteria in certain Prudential Annuities.
. Percentage Payments based upon sales: This type of payment is a
percentage payment that is based upon the total amount of money received
as purchase payments under Prudential Annuities annuity products sold
through the firm.
. Fixed Payments: These types of payments are made directly to or in
sponsorship of the firm (or its affiliated broker-dealers). Examples of
arrangements under which such payments may be made currently include,
but are not limited to: sponsorships, conferences (national, regional
and top producer), speaker fees, promotional items and reimbursements to
firms for marketing activities or services paid by the firms and/or
their registered representatives. The amount of these payments varies
widely because some payments may encompass only a single event, such as
a conference, and others have a much broader scope. In addition, we may
make payments periodically during the relationship for systems,
operational and other support.
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The list below includes the names of the firms (or their affiliated
broker/dealers) that we are aware (as of December 31, 2011) received payment
with respect to annuity business during 2011 (or as to which a payment amount
was accrued during 2011). The firms listed below include those receiving
payments in connection with marketing of products issued by Prudential
Annuities Life Assurance Corporation. Your registered representative can
provide you with more information about the compensation arrangements that
apply upon request. During 2011, the least amount paid, and greatest amount
paid, were $55.80 and $6,849,236.54, respectively.
NAME OF FIRM:
Allstate Financial Srvcs, LLC
American Portfolio Fin Svcs Inc
Associated Securities Corp
AXA Advisors, LLC
BFT Financial Group, LLC
Cadaret, Grant & Co., Inc.
Cambridge Investment Research, Inc.
Capital One Investment Services, LLC
Centaurus Financial, Inc.
CFD Investments, Inc.
Commonwealth Financial Network
Crown Capital Securities, L.P.
CUNA Brokerage Svcs, Inc.
CUSO Financial Services, L.P.
Equity Services, Inc.
Fifth Third Securities, Inc.
Financial Network Investment
First Allied Securities Inc
First Tennessee Brokerage, Inc
FSC Securities Corp.
Gary Goldberg & Co., Inc.
Geneos Wealth Management, Inc. Genworth Financial Securities
H. Beck, Inc.
Hantz Financial Services, Inc.
ING Financial Partners, LLC
Invest Financial Corporation
Investacorp
Investment Centers of America
Investment Professionals
Investors Capital Corporation
Janney Montgomery Scott, LLC.
Legend Equities Corporation
Lincoln Financial Advisors
Lincoln Financial Securities Corporation
Lincoln Investment Planning
M Holdings Securities, Inc
MetLife
Multi Financial Securities Crp
Mutual Service Corporation
National Planning Corporation
Next Financial Group, Inc.
NFP Securities, Inc.
Presidential Brokerage, Inc.
Primevest Financial Services
ProEquities
QA3 Financial Corp.
Questar Capital Corporation
Raymond James & Associates Raymond James Financial Svcs
RBC Capital Markets Corporation
Robert W. Baird & Co., Inc.
Royal Alliance Associates
Sagepoint Financial, Inc.
Sammons Securities Co., LLC
Securian Financial Svcs, Inc.
Securities America, Inc.
Securities Service Network
Sigma Financial Corporation
Signator Investors, Inc.
SII Investments, Inc.
Spelman & Co., Inc.
Stifel Nicolaus & Co.
Summit Brokerage Services, Inc
TFS Securities, Inc.
The Investment Center
TransAmerica Financial Advisors, Inc. Triad Advisors, Inc.
UBS Financial Services, Inc.
United Planners Fin. Serv.
UVEST Fin'l Srvcs Group, Inc.
Wall Street Financial Group
Waterstone Financial Group Inc
Wells Fargo Advisors LLC
Wells Fargo Advisors LLC - Wealth
Wells Fargo Investments LLC
Woodbury Financial Services
World Group Securities, Inc.
WRP Investments, Inc
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
Prudential Annuities Life Assurance Corporation incorporates by reference into
the prospectus its latest annual report on Form 10-K filed pursuant to Section
13(a) or Section 15(d) of the Exchange Act since the end of the fiscal year
covered by its latest annual report. In addition, all documents subsequently
filed by us pursuant to Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act
also are incorporated into the prospectus by reference. We will provide to
each person, including any beneficial owner, to whom a prospectus is
delivered, a copy of any or all of the information that has been incorporated
by reference into the prospectus but not delivered with the prospectus. Such
information will be provided upon written or oral request at no cost to the
requester by writing to Prudential Annuities Life Assurance Corporation, One
Corporate Drive, Shelton, CT 06484 or by calling 888-PRU-2888. We file
periodic reports as required under the Securities Exchange Act of 1934. The
public may read and copy any materials that we file with the SEC at the SEC's
Public Reference Room at 100 F Street, N.E., Washington, D.C. 20549. The
public may obtain information on the operation of the Public Reference Room by
calling the SEC at 1-202-551-8090. The SEC maintains an Internet site that
contains reports, proxy, and information statements, and other information
regarding issuers that file electronically with the SEC (see
http://www.sec.gov). Our internet address is
http://www.prudentialannuities.com.
FINANCIAL STATEMENTS
The financial statements of the separate account and Prudential Annuities Life
Assurance Corporation are included in the Statement of Additional Information.
HOW TO CONTACT US
You can contact us by:
.. calling our Customer Service Team at 1-888-PRU-2888 during our normal
business hours, or our telephone automated response system at
1-800-766-4530.
211
.. writing to us via regular mail at Prudential Annuities, P.O. Box 7960,
Philadelphia, PA 19176 OR for express mail Prudential Annuities, 2101 Welsh
Road, Dresher, PA 19025. NOTE: Failure to send mail to the proper address
may result in a delay in our receiving and processing your request.
.. accessing information about your Annuity through our Internet Website at
www.prudentialannuities.com.
You can obtain account information by calling our automated response system,
and at www.prudentialannuities.com, our Internet Website. Our Customer Service
representatives are also available during business hours to provide you with
information about your account. You can request certain transactions through
our telephone voice response system, our Internet Website or through a
customer service representative. You can provide authorization for a third
party, including your attorney-in-fact acting pursuant to a power of attorney
or your Financial Professional, to access your account information and perform
certain transactions on your account. You will need to complete a form
provided by us which identifies those transactions that you wish to authorize
via telephonic and electronic means and whether you wish to authorize a third
party to perform any such transactions. Please note that unless you tell us
otherwise, we deem that all transactions that are directed by your Financial
Professional with respect to your Annuity have been authorized by you. We
require that you or your representative provide proper identification before
performing transactions over the telephone or through our Internet Website.
This may include a Personal Identification Number (PIN) that will be provided
to you upon issue of your Annuity or you may establish or change your PIN by
calling our automated response system, www.prudentialannuities.com, our
Internet Website. Any third party that you authorize to perform financial
transactions on your account will be assigned a PIN for your account.
Transactions requested via telephone are recorded. To the extent permitted by
law, we will not be responsible for any claims, loss, liability or expense in
connection with a transaction requested by telephone or other electronic means
if we acted on such transaction instructions after following reasonable
procedures to identify those persons authorized to perform transactions on
your Annuity using verification methods which may include a request for your
Social Security number, PIN or other form of electronic identification. We may
be liable for losses due to unauthorized or fraudulent instructions if we did
not follow such procedures.
Prudential Annuities does not guarantee access to telephonic, facsimile,
Internet or any other electronic information or that we will be able to accept
transaction instructions via such means at all times. Regular and/or express
mail will be the only means by which we will accept transaction instructions
when telephonic, facsimile, Internet or any other electronic means are
unavailable or delayed. Prudential Annuities reserves the right to limit,
restrict or terminate telephonic, facsimile, Internet or any other electronic
transaction privileges at any time.
INDEMNIFICATION
Insofar as indemnification for liabilities arising under the Securities Act of
1933 (the "Securities Act") may be permitted to directors, officers or persons
controlling the registrant pursuant to the foregoing provisions, the
registrant has been informed that in the opinion of the SEC such
indemnification is against public policy as expressed in the Securities Act
and is therefore unenforceable.
LEGAL PROCEEDINGS
We are subject to legal and regulatory actions in the ordinary course of our
business. Our pending legal and regulatory actions include proceedings
specific to the Company and proceedings generally applicable to business
practices in the industry in which we operate. We may be subject to class
action lawsuits and other litigation alleging, among other things, that we
made improper or inadequate disclosures in connection with the sale of assets
and annuity and investment products or charged excessive or impermissible fees
on these products, recommended unsuitable products to customers, mishandled
customer accounts or breached fiduciary duties to customers. We are also
subject to litigation arising out of our general business activities, such as
our investments contracts, and could be exposed to claims or litigation
concerning certain business or process patents. Regulatory authorities from
time to time make inquiries and conduct investigations and examinations
relating particularly to us and our products. In addition, we, along with
other participants in the business in which we engage, may be subject from
time to time to investigations, examinations and inquiries, in some cases
industry-wide, concerning issues or matters upon which such regulators have
determined to focus. In some of our pending legal and regulatory actions,
parties are seeking large and/or indeterminate amounts, including punitive or
exemplary damages. The outcome of a litigation or regulatory matter, and the
amount or range of potential loss at any particular time, is often inherently
uncertain.
In January 2012, a qui tam action on behalf of the State of Illinois, Total
Asset Recovery Services v. Met Life Inc, et al., Prudential Financial, Inc.,
The Prudential Insurance Company of America, and Prudential Holdings, LLC,
filed in the Circuit Court of Cook County, Illinois, was served on Prudential
Annuities. The complaint alleges that Prudential Annuities failed to escheat
life insurance proceeds to the State of Illinois in violation of the Illinois
False Claims Whistleblower Reward and Protection Act and seeks injunctive
relief, compensatory damages, civil penalties, treble damages, prejudgment
interest, attorneys' fees and costs. In March 2012, a qui tam action on behalf
of the State of Minnesota, Total Asset Recovery v. MetLife Inc., et al.,
Prudential Financial Inc., The Prudential Insurance Company of America and
Prudential Holdings, Inc., filed in the Fourth Judicial District, Hennepin
County, in the State of Minnesota was served on Prudential Annuities. The
complaint alleges that Prudential Annuities failed to escheat life insurance
proceeds to the State of Minnesota in violation of the Minnesota False Claims
Act and seeks injunctive relief, compensatory damages, civil penalties, treble
damages, prejudgment interest, attorneys' fees and costs.
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In January 2012, a Global Resolution Agreement entered into by Prudential
Annuities and a third party auditor became effective upon its acceptance by
the unclaimed property departments of 20 states and jurisdictions. Under the
terms of the Global Resolution Agreement, the third party auditor acting on
behalf of the signatory states will compare expanded matching criteria to the
Social Security Master Death File ("SSMDF") to identify deceased insureds and
contract holders where a valid claim has not been made. In February 2012, a
Regulatory Settlement Agreement entered into by Prudential Annuities to
resolve a multi-state market conduct examination regarding its adherence to
state claim settlement practices became effective upon its acceptance by the
insurance departments of 20 states and jurisdictions. The Regulatory
Settlement Agreement applies prospectively and requires Prudential Annuities
to adopt and implement additional procedures comparing its records to the
SSMDF to identify unclaimed death benefits and prescribes procedures for
identifying and locating beneficiaries once deaths are identified. Other
jurisdictions that are not signatories to the Regulatory Settlement Agreement
are considering proposals that would apply prospectively and require life
insurance companies to take additional steps to identify unreported deceased
policy and contract holders. These prospective changes and any escheatable
property identified as a result of the audits and inquiries could result in:
(1) additional payments of previously unclaimed death benefits; (2) the
payment of abandoned funds to U.S. jurisdictions; and (3) changes in
Prudential Annuities' practices and procedures for the identification of
escheatable funds and beneficiaries, which would impact claim payments and
reserves, among other consequences.
Prudential Annuities is one of several companies subpoenaed by the New York
Attorney General regarding its unclaimed property procedures. Additionally,
the New York Department of Insurance ("NYDOI") has requested that 172 life
insurers (including Prudential Annuities) provide data to the NYDOI regarding
use of the SSMDF. The New York Office of Unclaimed Funds recently notified
Prudential Annuities that it intends to conduct an audit of Prudential
Annuities' compliance with New York's unclaimed property laws. The Minnesota
Attorney General has also requested information regarding Prudential
Annuities' use of the SSMDF and its claim handling procedures and Prudential
Annuities is one of several companies subpoenaed by the Minnesota Department
of Commerce, Insurance Division. In February 2012, the Massachusetts Office of
the Attorney General requested information regarding Prudential Annuities'
unclaimed property procedures.
Prudential Annuities' litigation and regulatory matters are subject to many
uncertainties, and given their complexity and scope, their outcome cannot be
predicted. It is possible that Prudential Annuities' results of operations or
cash flow in a particular quarterly or annual period could be materially
affected by an ultimate unfavorable resolution of pending litigation and
regulatory matters depending, in part, upon the results of operations or cash
flow for such period. In light of the unpredictability of Prudential
Annuities' litigation and regulatory matters, it is also possible that in
certain cases an ultimate unfavorable resolution of one or more pending
litigation or regulatory matters could have a material adverse effect on
Prudential Annuities' financial position. Management believes, however, that,
based on information currently known to it, the ultimate outcome of all
pending litigation and regulatory matters, after consideration of applicable
reserves and rights to indemnification, is not likely to have a material
adverse effect on Prudential Annuities' financial position.
CONTENTS OF THE STATEMENT OF ADDITIONAL INFORMATION
The following are the contents of the Statement of Additional Information:
General Information about Prudential Annuities
Prudential Annuities Life Assurance Corporation
Prudential Annuities Life Assurance Corporation Variable Account B
Prudential Annuities Life Assurance Corporation Separate Account D
Principal Underwriter/Distributor - Prudential Annuities Distributors, Inc.
How the Unit Price is Determined
Additional Information on Fixed Allocations
How We Calculate the Market Value Adjustment
General Information
Voting Rights
Modification
Deferral of Transactions
Misstatement of Age or Sex
Annuitization
Experts
Legal Experts
Financial Statements
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ADVANCED SERIES ADVISORS CHOICE(R) 2000 PROSPECTUS
APPENDIX A - CONDENSED FINANCIAL INFORMATION ABOUT SEPARATE ACCOUNT B
Separate Account B consists of multiple Sub-accounts that are available as
investment options for the Prudential Annuities. Each Sub-account invests only
in a single mutual fund or mutual fund portfolio. All or some of these
Sub-accounts are available as investment options for other variable annuities
we offer pursuant to different prospectuses.
UNIT PRICES AND NUMBERS OF UNITS: The following table shows for the Annuity:
(a) the historical Unit Price, corresponding to the Annuity features bearing
the highest and lowest combinations of asset-based charges*, as of the dates
shown, for Units in each of the Sub-accounts of Separate Account B that are
being offered pursuant to this Prospectus**; and (b) the number of Units
outstanding for each such Sub-account as of the dates shown. The period for
each year begins on January 1 and ends on December 31. Since November 18,
2002, we have been determining, on a daily basis, multiple Unit Prices for
each Sub-account of Separate Account B. We compute multiple Unit Prices
because several of our variable annuities invest in the same Sub-accounts, and
these annuities deduct varying charges that correspond to each combination of
the applicable Insurance Charge, Distribution Charge (when applicable) and the
charges for each optional benefit. Where an asset-based charge corresponding
to a particular Sub-account within a new annuity product is identical to that
in the same Sub-account within an existing annuity, the Unit Price for the new
annuity will be identical to that of the existing annuity. In such cases, we
will for reference purposes depict, in the condensed financial information for
the new annuity, Unit Prices of the existing annuity. To the extent a
Sub-account commenced operations during a particular calendar year, the Unit
Price as of the end of the period reflects only the partial year results from
the commencement of operations until December 31st of the applicable year.
When a Unit Price was first calculated for a particular Sub-account, we set
the price of that Unit at $10.00 per Unit. Thereafter, Unit Prices vary based
on market performance. Unit Prices and Units are provided for Sub-accounts
that commenced operations prior to January 1, 2012.
* Note: While a unit price is reflected for the maximum combination of asset
based charges for each Sub-account, not all Sub-accounts are available if
you elect certain optional benefits.
** The remaining unit values appear in the Statement of Additional
Information, which you may obtain free of charge by sending in the request
form at the end of the Prospectus or contacting us at 1-888-PRU-2888.
ADVISORS CHOICE 2000
PRUDENTIAL ANNUITIES LIFE ASSURANCE CORPORATION
PROSPECTUS
ACCUMULATION UNIT VALUES: WITH NO OPTIONAL BENEFITS (0.65%)
Number of
Accumulation Accumulation Accumulation
Unit Value at Unit Value at Units Outstanding at
Sub-Accounts Beginning of Period End of Period End of Period
----------------------------------------------------------------------------------------------------------
ACCESS VP HIGH YIELD FUND
05/02/2005* to 12/31/2005 $10.00 $10.63 258,925
01/01/2006 to 12/31/2006 $10.63 $11.58 203,717
01/01/2007 to 12/31/2007 $11.58 $12.10 64,588
01/01/2008 to 12/31/2008 $12.10 $11.46 94,385
01/01/2009 to 12/31/2009 $11.46 $13.31 135,903
01/01/2010 to 12/31/2010 $13.31 $15.39 125,007
01/01/2011 to 12/31/2011 $15.39 $15.71 346,182
----------------------------------------------------------------------------------------------------------
AST ACADEMIC STRATEGIES ASSET ALLOCATION PORTFOLIO
12/05/2005* to 12/31/2005 $10.00 $10.02 161,883
01/01/2006 to 12/31/2006 $10.02 $11.13 634,693
01/01/2007 to 12/31/2007 $11.13 $12.08 734,238
01/01/2008 to 12/31/2008 $12.08 $8.18 514,963
01/01/2009 to 12/31/2009 $8.18 $10.11 808,804
01/01/2010 to 12/31/2010 $10.11 $11.24 827,492
01/01/2011 to 12/31/2011 $11.24 $10.87 1,140,506
A-1
Number of
Accumulation Accumulation Accumulation
Unit Value at Unit Value at Units Outstanding at
Sub-Accounts Beginning of Period End of Period End of Period
------------------------------------------------------------------------------------------------------
AST ADVANCED STRATEGIES PORTFOLIO
03/20/2006* to 12/31/2006 $10.00 $10.74 552,445
01/01/2007 to 12/31/2007 $10.74 $11.69 320,190
01/01/2008 to 12/31/2008 $11.69 $8.15 262,057
01/01/2009 to 12/31/2009 $8.15 $10.22 309,674
01/01/2010 to 12/31/2010 $10.22 $11.55 444,579
01/01/2011 to 12/31/2011 $11.55 $11.48 845,791
------------------------------------------------------------------------------------------------------
AST ALGER ALL-CAP GROWTH PORTFOLIO
01/01/2002 to 12/31/2002 $5.63 $3.59 624,243
01/01/2003 to 12/31/2003 $3.59 $4.83 564,609
01/01/2004 to 12/31/2004 $4.83 $5.21 487,430
01/01/2005 to 12/02/2005 $5.21 $6.03 0
------------------------------------------------------------------------------------------------------
AST ALLIANCEBERNSTEIN GROWTH + VALUE PORTFOLIO
01/01/2002 to 12/31/2002 $9.68 $7.21 24,048
01/01/2003 to 12/31/2003 $7.21 $9.03 42,479
01/01/2004 to 12/31/2004 $9.03 $9.88 115,998
01/01/2005 to 12/02/2005 $9.88 $11.03 0
------------------------------------------------------------------------------------------------------
AST AMERICAN CENTURY INCOME & GROWTH PORTFOLIO
01/01/2002 to 12/31/2002 $13.34 $10.62 278,381
01/01/2003 to 12/31/2003 $10.62 $13.59 247,785
01/01/2004 to 12/31/2004 $13.59 $15.20 524,434
01/01/2005 to 12/31/2005 $15.20 $15.80 404,602
01/01/2006 to 12/31/2006 $15.80 $18.35 317,435
01/01/2007 to 12/31/2007 $18.35 $18.21 243,704
01/01/2008 to 12/31/2008 $18.21 $11.81 236,861
01/01/2009 to 12/31/2009 $11.81 $13.81 252,293
01/01/2010 to 12/31/2010 $13.81 $15.62 205,155
01/01/2011 to 12/31/2011 $15.62 $16.08 270,247
------------------------------------------------------------------------------------------------------
AST BALANCED ASSET ALLOCATION PORTFOLIO
12/05/2005* to 12/31/2005 $10.00 $10.03 0
01/01/2006 to 12/31/2006 $10.03 $11.02 128,835
01/01/2007 to 12/31/2007 $11.02 $11.94 179,010
01/01/2008 to 12/31/2008 $11.94 $8.46 192,177
01/01/2009 to 12/31/2009 $8.46 $10.36 281,718
01/01/2010 to 12/31/2010 $10.36 $11.56 347,104
01/01/2011 to 12/31/2011 $11.56 $11.35 764,963
------------------------------------------------------------------------------------------------------
AST BLACKROCK GLOBAL STRATEGIES PORTFOLIO
05/02/2011* to 12/31/2011 $10.00 $9.23 61,977
------------------------------------------------------------------------------------------------------
AST BLACKROCK VALUE PORTFOLIO
FORMERLY, AST VALUE PORTFOLIO
01/01/2002 to 12/31/2002 $9.23 $7.77 80,618
01/01/2003 to 12/31/2003 $7.77 $9.77 139,126
01/01/2004 to 12/31/2004 $9.77 $11.47 188,892
01/01/2005 to 12/31/2005 $11.47 $12.46 330,758
01/01/2006 to 12/31/2006 $12.46 $15.07 500,736
01/01/2007 to 12/31/2007 $15.07 $15.15 351,045
01/01/2008 to 12/31/2008 $15.15 $9.44 322,089
01/01/2009 to 12/31/2009 $9.44 $11.09 290,914
01/01/2010 to 12/31/2010 $11.09 $12.38 257,415
01/01/2011 to 12/31/2011 $12.38 $12.24 227,771
A-2
Number of
Accumulation Accumulation Accumulation
Unit Value at Unit Value at Units Outstanding at
Sub-Accounts Beginning of Period End of Period End of Period
-----------------------------------------------------------------------------------------------------
AST CAPITAL GROWTH ASSET ALLOCATION PORTFOLIO
12/05/2005* to 12/31/2005 $10.00 $10.01 78,453
01/01/2006 to 12/31/2006 $10.01 $11.31 271,080
01/01/2007 to 12/31/2007 $11.31 $12.33 365,220
01/01/2008 to 12/31/2008 $12.33 $7.97 418,245
01/01/2009 to 12/31/2009 $7.97 $9.92 594,543
01/01/2010 to 12/31/2010 $9.92 $11.18 634,072
01/01/2011 to 12/31/2011 $11.18 $10.84 954,284
-----------------------------------------------------------------------------------------------------
AST CLS GROWTH ASSET ALLOCATION PORTFOLIO
11/19/2007* to 12/31/2007 $10.00 $11.52 0
01/01/2008 to 12/31/2008 $11.52 $7.42 24,424
01/01/2009 to 12/31/2009 $7.42 $9.35 129,891
01/01/2010 to 12/31/2010 $9.35 $10.62 185,018
01/01/2011 to 12/31/2011 $10.62 $10.30 198,127
-----------------------------------------------------------------------------------------------------
AST CLS MODERATE ASSET ALLOCATION PORTFOLIO
11/19/2007* to 12/31/2007 $10.00 $10.05 0
01/01/2008 to 12/31/2008 $10.05 $7.23 21,689
01/01/2009 to 12/31/2009 $7.23 $8.87 60,307
01/01/2010 to 12/31/2010 $8.87 $9.86 159,984
01/01/2011 to 12/31/2011 $9.86 $9.62 221,592
-----------------------------------------------------------------------------------------------------
AST COHEN & STEERS REALTY PORTFOLIO
01/01/2002 to 12/31/2002 $10.86 $11.08 317,670
01/01/2003 to 12/31/2003 $11.08 $15.12 507,911
01/01/2004 to 12/31/2004 $15.12 $20.73 481,197
01/01/2005 to 12/31/2005 $20.73 $23.65 363,491
01/01/2006 to 12/31/2006 $23.65 $32.12 399,562
01/01/2007 to 12/31/2007 $32.12 $25.55 207,198
01/01/2008 to 12/31/2008 $25.55 $16.49 195,345
01/01/2009 to 12/31/2009 $16.49 $21.61 210,777
01/01/2010 to 12/31/2010 $21.61 $27.63 222,302
01/01/2011 to 12/31/2011 $27.63 $29.26 182,906
-----------------------------------------------------------------------------------------------------
AST DEAM SMALL-CAP VALUE PORTFOLIO
01/01/2002 to 12/31/2002 -- $7.72 22,404
01/01/2003 to 12/31/2003 $7.72 $11.00 110,748
01/01/2004 to 12/31/2004 $11.00 $13.34 118,424
01/01/2005 to 12/31/2005 $13.34 $13.41 120,340
01/01/2006 to 12/31/2006 $13.41 $15.98 127,465
01/01/2007 to 12/31/2007 $15.98 $13.06 93,823
01/01/2008 to 07/18/2008 $13.06 $12.03 0
-----------------------------------------------------------------------------------------------------
AST FEDERATED AGGRESSIVE GROWTH PORTFOLIO
01/01/2002 to 12/31/2002 $7.17 $5.04 276,968
01/01/2003 to 12/31/2003 $5.04 $8.49 322,365
01/01/2004 to 12/31/2004 $8.49 $10.38 477,568
01/01/2005 to 12/31/2005 $10.38 $11.29 451,208
01/01/2006 to 12/31/2006 $11.29 $12.66 493,437
01/01/2007 to 12/31/2007 $12.66 $13.99 353,469
01/01/2008 to 12/31/2008 $13.99 $7.77 264,224
01/01/2009 to 12/31/2009 $7.77 $10.24 214,622
01/01/2010 to 12/31/2010 $10.24 $13.49 285,989
01/01/2011 to 12/31/2011 $13.49 $11.64 339,489
A-3
Number of
Accumulation Accumulation Accumulation
Unit Value at Unit Value at Units Outstanding at
Sub-Accounts Beginning of Period End of Period End of Period
------------------------------------------------------------------------------------------------------------------
AST FI PYRAMIS(R) ASSET ALLOCATION PORTFOLIO
11/19/2007* to 12/31/2007 $10.00 $10.01 0
01/01/2008 to 12/31/2008 $10.01 $7.24 14,270
01/01/2009 to 12/31/2009 $7.24 $8.72 72,500
01/01/2010 to 12/31/2010 $8.72 $9.82 97,747
01/01/2011 to 12/31/2011 $9.82 $9.51 101,744
------------------------------------------------------------------------------------------------------------------
AST FIRST TRUST BALANCED TARGET PORTFOLIO
03/20/2006* to 12/31/2006 $10.00 $10.67 34,428
01/01/2007 to 12/31/2007 $10.67 $11.50 102,596
01/01/2008 to 12/31/2008 $11.50 $7.49 80,252
01/01/2009 to 12/31/2009 $7.49 $9.21 337,584
01/01/2010 to 12/31/2010 $9.21 $10.47 401,744
01/01/2011 to 12/31/2011 $10.47 $10.24 451,986
------------------------------------------------------------------------------------------------------------------
AST FIRST TRUST CAPITAL APPRECIATION TARGET PORTFOLIO
03/20/2006* to 12/31/2006 $10.00 $10.57 33,872
01/01/2007 to 12/31/2007 $10.57 $11.70 65,626
01/01/2008 to 12/31/2008 $11.70 $6.89 145,568
01/01/2009 to 12/31/2009 $6.89 $8.62 554,070
01/01/2010 to 12/31/2010 $8.62 $10.20 725,296
01/01/2011 to 12/31/2011 $10.20 $9.50 835,424
------------------------------------------------------------------------------------------------------------------
AST FOCUS FOUR PLUS PORTFOLIO
07/21/2008* to 12/31/2008 $10.00 $7.51 11,768
01/01/2009 to 11/13/2009 $7.51 $8.47 0
------------------------------------------------------------------------------------------------------------------
AST GLOBAL REAL ESTATE PORTFOLIO
07/21/2008* to 12/31/2008 $10.18 $6.14 0
01/01/2009 to 12/31/2009 $6.14 $8.24 19,450
01/01/2010 to 12/31/2010 $8.24 $9.84 29,513
01/01/2011 to 12/31/2011 $9.84 $9.29 33,471
------------------------------------------------------------------------------------------------------------------
AST GOLDMAN SACHS CONCENTRATED GROWTH PORTFOLIO
01/01/2002 to 12/31/2002 $25.38 $17.69 397,460
01/01/2003 to 12/31/2003 $17.69 $22.02 282,942
01/01/2004 to 12/31/2004 $22.02 $22.68 225,304
01/01/2005 to 12/31/2005 $22.68 $23.28 186,688
01/01/2006 to 12/31/2006 $23.28 $25.44 159,473
01/01/2007 to 12/31/2007 $25.44 $28.81 169,007
01/01/2008 to 12/31/2008 $28.81 $17.10 143,367
01/01/2009 to 12/31/2009 $17.10 $25.38 145,929
01/01/2010 to 12/31/2010 $25.38 $27.81 105,214
01/01/2011 to 12/31/2011 $27.81 $26.53 85,173
------------------------------------------------------------------------------------------------------------------
AST GOLDMAN SACHS LARGE-CAP VALUE PORTFOLIO
FORMERLY, AST ALLIANCEBERNSTEIN GROWTH & INCOME PORTFOLIO
01/01/2002 to 12/31/2002 $25.17 $19.18 781,774
01/01/2003 to 12/31/2003 $19.18 $25.23 772,571
01/01/2004 to 12/31/2004 $25.23 $27.83 881,766
01/01/2005 to 12/31/2005 $27.83 $28.97 769,120
01/01/2006 to 12/31/2006 $28.97 $33.75 654,696
01/01/2007 to 12/31/2007 $33.75 $35.25 488,085
01/01/2008 to 12/31/2008 $35.25 $20.77 412,893
01/01/2009 to 12/31/2009 $20.77 $24.60 334,514
01/01/2010 to 12/31/2010 $24.60 $27.59 316,015
01/01/2011 to 12/31/2011 $27.59 $25.89 419,855
A-4
Number of
Accumulation Accumulation Accumulation
Unit Value at Unit Value at Units Outstanding at
Sub-Accounts Beginning of Period End of Period End of Period
-------------------------------------------------------------------------------------------------------
AST GOLDMAN SACHS MID-CAP GROWTH PORTFOLIO
01/01/2002 to 12/31/2002 $3.93 $2.83 162,029
01/01/2003 to 12/31/2003 $2.83 $3.70 408,709
01/01/2004 to 12/31/2004 $3.70 $4.28 585,234
01/01/2005 to 12/31/2005 $4.28 $4.46 640,026
01/01/2006 to 12/31/2006 $4.46 $4.70 535,222
01/01/2007 to 12/31/2007 $4.70 $5.58 530,702
01/01/2008 to 12/31/2008 $5.58 $3.28 426,340
01/01/2009 to 12/31/2009 $3.28 $5.12 557,630
01/01/2010 to 12/31/2010 $5.12 $6.10 548,100
01/01/2011 to 12/31/2011 $6.10 $5.88 523,076
-------------------------------------------------------------------------------------------------------
AST GOLDMAN SACHS SMALL-CAP VALUE PORTFOLIO
01/01/2002 to 12/31/2002 $15.58 $14.25 572,355
01/01/2003 to 12/31/2003 $14.25 $19.98 396,816
01/01/2004 to 12/31/2004 $19.98 $23.85 276,076
01/01/2005 to 12/31/2005 $23.85 $24.88 201,122
01/01/2006 to 12/31/2006 $24.88 $28.97 153,674
01/01/2007 to 12/31/2007 $28.97 $27.31 116,213
01/01/2008 to 12/31/2008 $27.31 $19.91 138,252
01/01/2009 to 12/31/2009 $19.91 $25.09 94,509
01/01/2010 to 12/31/2010 $25.09 $31.59 102,428
01/01/2011 to 12/31/2011 $31.59 $31.80 100,063
-------------------------------------------------------------------------------------------------------
AST HIGH YIELD PORTFOLIO
01/01/2002 to 12/31/2002 $13.25 $13.17 1,347,832
01/01/2003 to 12/31/2003 $13.17 $15.90 2,292,230
01/01/2004 to 12/31/2004 $15.90 $17.55 1,530,847
01/01/2005 to 12/31/2005 $17.55 $17.63 912,214
01/01/2006 to 12/31/2006 $17.63 $19.33 1,010,388
01/01/2007 to 12/31/2007 $19.33 $19.68 555,621
01/01/2008 to 12/31/2008 $19.68 $14.56 737,090
01/01/2009 to 12/31/2009 $14.56 $19.61 1,146,221
01/01/2010 to 12/31/2010 $19.61 $22.11 985,871
01/01/2011 to 12/31/2011 $22.11 $22.66 938,171
-------------------------------------------------------------------------------------------------------
AST HORIZON GROWTH ASSET ALLOCATION PORTFOLIO
11/19/2007* to 12/31/2007 $10.00 $10.20 14
01/01/2008 to 12/31/2008 $10.20 $7.02 6,674
01/01/2009 to 12/31/2009 $7.02 $8.84 124,894
01/01/2010 to 12/31/2010 $8.84 $9.99 176,903
01/01/2011 to 12/31/2011 $9.99 $9.87 421,564
-------------------------------------------------------------------------------------------------------
AST HORIZON MODERATE ASSET ALLOCATION PORTFOLIO
11/19/2007* to 12/31/2007 $10.00 $10.18 0
01/01/2008 to 12/31/2008 $10.18 $7.67 14,904
01/01/2009 to 12/31/2009 $7.67 $9.40 135,469
01/01/2010 to 12/31/2010 $9.40 $10.42 196,430
01/01/2011 to 12/31/2011 $10.42 $10.30 538,708
A-5
Number of
Accumulation Accumulation Accumulation
Unit Value at Unit Value at Units Outstanding at
Sub-Accounts Beginning of Period End of Period End of Period
---------------------------------------------------------------------------------------------------------
AST INTERNATIONAL GROWTH PORTFOLIO
01/01/2002 to 12/31/2002 $14.04 $10.37 371,174
01/01/2003 to 12/31/2003 $10.37 $14.43 536,475
01/01/2004 to 12/31/2004 $14.43 $16.65 1,259,678
01/01/2005 to 12/31/2005 $16.65 $19.28 1,305,988
01/01/2006 to 12/31/2006 $19.28 $23.18 1,047,521
01/01/2007 to 12/31/2007 $23.18 $27.41 871,674
01/01/2008 to 12/31/2008 $27.41 $13.55 623,855
01/01/2009 to 12/31/2009 $13.55 $18.22 505,276
01/01/2010 to 12/31/2010 $18.22 $20.72 458,866
01/01/2011 to 12/31/2011 $20.72 $17.93 464,466
---------------------------------------------------------------------------------------------------------
AST INTERNATIONAL VALUE PORTFOLIO
01/01/2002 to 12/31/2002 $11.27 $9.29 200,531
01/01/2003 to 12/31/2003 $9.29 $12.36 283,809
01/01/2004 to 12/31/2004 $12.36 $14.86 275,575
01/01/2005 to 12/31/2005 $14.86 $16.79 245,299
01/01/2006 to 12/31/2006 $16.79 $21.26 305,423
01/01/2007 to 12/31/2007 $21.26 $24.88 328,815
01/01/2008 to 12/31/2008 $24.88 $13.84 229,179
01/01/2009 to 12/31/2009 $13.84 $17.95 210,754
01/01/2010 to 12/31/2010 $17.95 $19.81 196,629
01/01/2011 to 12/31/2011 $19.81 $17.21 161,934
---------------------------------------------------------------------------------------------------------
AST J.P. MORGAN STRATEGIC OPPORTUNITIES PORTFOLIO
01/01/2002 to 12/31/2002 $17.47 $14.68 100,537
01/01/2003 to 12/31/2003 $14.68 $17.43 87,241
01/01/2004 to 12/31/2004 $17.43 $19.24 64,342
01/01/2005 to 12/31/2005 $19.24 $20.44 76,214
01/01/2006 to 12/31/2006 $20.44 $22.57 76,805
01/01/2007 to 12/31/2007 $22.57 $22.85 146,030
01/01/2008 to 12/31/2008 $22.85 $18.71 149,602
01/01/2009 to 12/31/2009 $18.71 $22.68 218,323
01/01/2010 to 12/31/2010 $22.68 $24.18 182,056
01/01/2011 to 12/31/2011 $24.18 $24.08 267,474
---------------------------------------------------------------------------------------------------------
AST JENNISON LARGE-CAP GROWTH PORTFOLIO
11/16/2009* to 12/31/2009 $10.08 $10.30 22,698
01/01/2010 to 12/31/2010 $10.30 $11.40 13,544
01/01/2011 to 12/31/2011 $11.40 $11.40 36,658
---------------------------------------------------------------------------------------------------------
AST JENNISON LARGE-CAP VALUE PORTFOLIO
11/16/2009* to 12/31/2009 $10.15 $10.31 1,315
01/01/2010 to 12/31/2010 $10.31 $11.65 21,990
01/01/2011 to 12/31/2011 $11.65 $10.90 33,577
---------------------------------------------------------------------------------------------------------
AST JPMORGAN INTERNATIONAL EQUITY PORTFOLIO
01/01/2002 to 12/31/2002 $15.68 $12.71 254,902
01/01/2003 to 12/31/2003 $12.71 $16.49 219,979
01/01/2004 to 12/31/2004 $16.49 $19.19 239,273
01/01/2005 to 12/31/2005 $19.19 $21.17 307,972
01/01/2006 to 12/31/2006 $21.17 $25.82 277,002
01/01/2007 to 12/31/2007 $25.82 $28.08 241,370
01/01/2008 to 12/31/2008 $28.08 $16.35 207,758
01/01/2009 to 12/31/2009 $16.35 $22.07 196,726
01/01/2010 to 12/31/2010 $22.07 $23.50 184,676
01/01/2011 to 12/31/2011 $23.50 $21.21 197,787
A-6
Number of
Accumulation Accumulation Accumulation
Unit Value at Unit Value at Units Outstanding at
Sub-Accounts Beginning of Period End of Period End of Period
-----------------------------------------------------------------------------------------------------------
AST LARGE-CAP VALUE PORTFOLIO
01/01/2002 to 12/31/2002 $20.79 $17.04 274,957
01/01/2003 to 12/31/2003 $17.04 $20.31 244,888
01/01/2004 to 12/31/2004 $20.31 $23.29 269,303
01/01/2005 to 12/31/2005 $23.29 $24.64 466,853
01/01/2006 to 12/31/2006 $24.64 $28.99 449,189
01/01/2007 to 12/31/2007 $28.99 $27.94 341,897
01/01/2008 to 12/31/2008 $27.94 $16.24 292,765
01/01/2009 to 12/31/2009 $16.24 $19.28 214,556
01/01/2010 to 12/31/2010 $19.28 $21.67 177,724
01/01/2011 to 12/31/2011 $21.67 $20.63 157,828
-----------------------------------------------------------------------------------------------------------
AST LORD ABBETT CORE FIXED INCOME PORTFOLIO
FORMERLY, AST LORD ABBETT BOND-DEBENTURE PORTFOLIO
01/01/2002 to 12/31/2002 $10.38 $10.35 590,060
01/01/2003 to 12/31/2003 $10.35 $12.21 707,957
01/01/2004 to 12/31/2004 $12.21 $13.03 791,466
01/01/2005 to 12/31/2005 $13.03 $13.10 468,854
01/01/2006 to 12/31/2006 $13.10 $14.29 469,306
01/01/2007 to 12/31/2007 $14.29 $15.06 276,055
01/01/2008 to 12/31/2008 $15.06 $11.48 538,451
01/01/2009 to 12/31/2009 $11.48 $15.36 951,665
01/01/2010 to 12/31/2010 $15.36 $17.30 907,317
01/01/2011 to 12/31/2011 $17.30 $18.94 605,313
-----------------------------------------------------------------------------------------------------------
AST MARSICO CAPITAL GROWTH PORTFOLIO
01/01/2002 to 12/31/2002 $14.17 $11.89 1,177,309
01/01/2003 to 12/31/2003 $11.89 $15.56 1,583,309
01/01/2004 to 12/31/2004 $15.56 $17.88 1,855,254
01/01/2005 to 12/31/2005 $17.88 $18.98 1,948,184
01/01/2006 to 12/31/2006 $18.98 $20.22 1,691,127
01/01/2007 to 12/31/2007 $20.22 $23.09 1,626,729
01/01/2008 to 12/31/2008 $23.09 $12.93 1,250,191
01/01/2009 to 12/31/2009 $12.93 $16.66 993,190
01/01/2010 to 12/31/2010 $16.66 $19.82 803,524
01/01/2011 to 12/31/2011 $19.82 $19.52 876,529
-----------------------------------------------------------------------------------------------------------
AST MFS GLOBAL EQUITY PORTFOLIO
01/01/2002 to 12/31/2002 $9.09 $7.93 114,507
01/01/2003 to 12/31/2003 $7.93 $10.01 126,748
01/01/2004 to 12/31/2004 $10.01 $11.78 392,469
01/01/2005 to 12/31/2005 $11.78 $12.59 277,406
01/01/2006 to 12/31/2006 $12.59 $15.54 367,076
01/01/2007 to 12/31/2007 $15.54 $16.90 293,745
01/01/2008 to 12/31/2008 $16.90 $11.08 387,514
01/01/2009 to 12/31/2009 $11.08 $14.48 285,806
01/01/2010 to 12/31/2010 $14.48 $16.11 251,436
01/01/2011 to 12/31/2011 $16.11 $15.51 244,816
A-7
Number of
Accumulation Accumulation Accumulation
Unit Value at Unit Value at Units Outstanding at
Sub-Accounts Beginning of Period End of Period End of Period
----------------------------------------------------------------------------------------------------------
AST MFS GROWTH PORTFOLIO
01/01/2002 to 12/31/2002 $8.15 $5.82 643,644
01/01/2003 to 12/31/2003 $5.82 $7.10 596,050
01/01/2004 to 12/31/2004 $7.10 $7.81 601,222
01/01/2005 to 12/31/2005 $7.81 $8.25 623,371
01/01/2006 to 12/31/2006 $8.25 $8.99 352,548
01/01/2007 to 12/31/2007 $8.99 $10.28 323,164
01/01/2008 to 12/31/2008 $10.28 $6.51 330,448
01/01/2009 to 12/31/2009 $6.51 $8.04 262,374
01/01/2010 to 12/31/2010 $8.04 $9.00 238,175
01/01/2011 to 12/31/2011 $9.00 $8.89 301,403
----------------------------------------------------------------------------------------------------------
AST MID-CAP VALUE PORTFOLIO
01/01/2002 to 12/31/2002 $9.79 $7.71 201,049
01/01/2003 to 12/31/2003 $7.71 $10.41 268,077
01/01/2004 to 12/31/2004 $10.41 $11.93 214,855
01/01/2005 to 12/31/2005 $11.93 $12.50 128,928
01/01/2006 to 12/31/2006 $12.50 $14.18 104,222
01/01/2007 to 12/31/2007 $14.18 $14.48 76,177
01/01/2008 to 12/31/2008 $14.48 $8.90 83,071
01/01/2009 to 12/31/2009 $8.90 $12.28 81,755
01/01/2010 to 12/31/2010 $12.28 $15.08 60,254
01/01/2011 to 12/31/2011 $15.08 $14.47 67,600
----------------------------------------------------------------------------------------------------------
AST MONEY MARKET PORTFOLIO
01/01/2002 to 12/31/2002 $13.72 $13.81 8,322,994
01/01/2003 to 12/31/2003 $13.81 $13.80 5,253,119
01/01/2004 to 12/31/2004 $13.80 $13.83 4,248,368
01/01/2005 to 12/31/2005 $13.83 $14.11 6,016,530
01/01/2006 to 12/31/2006 $14.11 $14.66 4,838,370
01/01/2007 to 12/31/2007 $14.66 $15.28 5,852,766
01/01/2008 to 12/31/2008 $15.28 $15.56 6,505,997
01/01/2009 to 12/31/2009 $15.56 $15.50 4,145,564
01/01/2010 to 12/31/2010 $15.50 $15.40 3,304,777
01/01/2011 to 12/31/2011 $15.40 $15.31 3,760,229
----------------------------------------------------------------------------------------------------------
AST NEUBERGER BERMAN / LSV MID-CAP VALUE PORTFOLIO
01/01/2002 to 12/31/2002 $19.97 $17.75 765,716
01/01/2003 to 12/31/2003 $17.75 $24.04 653,342
01/01/2004 to 12/31/2004 $24.04 $29.33 726,167
01/01/2005 to 12/31/2005 $29.33 $32.66 669,160
01/01/2006 to 12/31/2006 $32.66 $35.93 518,563
01/01/2007 to 12/31/2007 $35.93 $36.83 370,556
01/01/2008 to 12/31/2008 $36.83 $21.13 287,372
01/01/2009 to 12/31/2009 $21.13 $29.52 223,891
01/01/2010 to 12/31/2010 $29.52 $36.21 210,308
01/01/2011 to 12/31/2011 $36.21 $35.08 220,400
----------------------------------------------------------------------------------------------------------
AST NEUBERGER BERMAN CORE BOND PORTFOLIO
10/31/2011* to 12/31/2011 $10.03 $10.09 0
A-8
Number of
Accumulation Accumulation Accumulation
Unit Value at Unit Value at Units Outstanding at
Sub-Accounts Beginning of Period End of Period End of Period
--------------------------------------------------------------------------------------------------------
AST NEUBERGER BERMAN MID-CAP GROWTH PORTFOLIO
01/01/2002 to 12/31/2002 $19.88 $13.59 323,369
01/01/2003 to 12/31/2003 $13.59 $17.62 273,193
01/01/2004 to 12/31/2004 $17.62 $20.32 340,048
01/01/2005 to 12/31/2005 $20.32 $22.92 532,540
01/01/2006 to 12/31/2006 $22.92 $25.97 332,998
01/01/2007 to 12/31/2007 $25.97 $31.53 366,101
01/01/2008 to 12/31/2008 $31.53 $17.80 236,207
01/01/2009 to 12/31/2009 $17.80 $22.95 195,951
01/01/2010 to 12/31/2010 $22.95 $29.34 203,792
01/01/2011 to 12/31/2011 $29.34 $29.64 193,089
--------------------------------------------------------------------------------------------------------
AST NEUBERGER BERMAN SMALL-CAP GROWTH PORTFOLIO
01/01/2002 to 12/31/2002 $8.65 $6.32 493,736
01/01/2003 to 12/31/2003 $6.32 $9.27 574,817
01/01/2004 to 12/31/2004 $9.27 $10.07 411,807
01/01/2005 to 12/31/2005 $10.07 $10.05 346,230
01/01/2006 to 12/31/2006 $10.05 $10.75 242,350
01/01/2007 to 12/31/2007 $10.75 $12.68 290,952
01/01/2008 to 12/31/2008 $12.68 $7.24 232,365
01/01/2009 to 12/31/2009 $7.24 $8.82 212,038
01/01/2010 to 12/31/2010 $8.82 $10.54 204,365
01/01/2011 to 04/29/2011 $10.54 $11.86 0
--------------------------------------------------------------------------------------------------------
AST PARAMETRIC EMERGING MARKETS EQUITY PORTFOLIO
07/21/2008* to 12/31/2008 $10.10 $5.60 839
01/01/2009 to 12/31/2009 $5.60 $9.26 188,391
01/01/2010 to 12/31/2010 $9.26 $11.25 405,685
01/01/2011 to 12/31/2011 $11.25 $8.91 170,367
--------------------------------------------------------------------------------------------------------
AST PIMCO LIMITED MATURITY BOND PORTFOLIO
01/01/2002 to 12/31/2002 $14.24 $15.03 1,605,101
01/01/2003 to 12/31/2003 $15.03 $15.42 1,309,374
01/01/2004 to 12/31/2004 $15.42 $15.64 1,681,588
01/01/2005 to 12/31/2005 $15.64 $15.79 1,881,200
01/01/2006 to 12/31/2006 $15.79 $16.28 1,638,686
01/01/2007 to 12/31/2007 $16.28 $17.28 1,418,200
01/01/2008 to 12/31/2008 $17.28 $17.36 1,293,493
01/01/2009 to 12/31/2009 $17.36 $19.01 1,360,911
01/01/2010 to 12/31/2010 $19.01 $19.62 1,264,250
01/01/2011 to 12/31/2011 $19.62 $19.93 1,275,360
--------------------------------------------------------------------------------------------------------
AST PIMCO TOTAL RETURN BOND PORTFOLIO
01/01/2002 to 12/31/2002 $16.20 $17.58 2,496,607
01/01/2003 to 12/31/2003 $17.58 $18.39 1,896,238
01/01/2004 to 12/31/2004 $18.39 $19.18 1,862,830
01/01/2005 to 12/31/2005 $19.18 $19.53 1,765,635
01/01/2006 to 12/31/2006 $19.53 $20.13 1,820,967
01/01/2007 to 12/31/2007 $20.13 $21.66 1,940,862
01/01/2008 to 12/31/2008 $21.66 $21.04 2,172,766
01/01/2009 to 12/31/2009 $21.04 $24.35 2,195,872
01/01/2010 to 12/31/2010 $24.35 $26.06 2,230,149
01/01/2011 to 12/31/2011 $26.06 $26.72 1,753,204
A-9
Number of
Accumulation Accumulation Accumulation
Unit Value at Unit Value at Units Outstanding at
Sub-Accounts Beginning of Period End of Period End of Period
------------------------------------------------------------------------------------------------------------
AST PRESERVATION ASSET ALLOCATION PORTFOLIO
12/05/2005* to 12/31/2005 $10.00 $10.04 0
01/01/2006 to 12/31/2006 $10.04 $10.77 67,695
01/01/2007 to 12/31/2007 $10.77 $11.64 104,035
01/01/2008 to 12/31/2008 $11.64 $9.31 190,056
01/01/2009 to 12/31/2009 $9.31 $11.10 410,875
01/01/2010 to 12/31/2010 $11.10 $12.20 393,819
01/01/2011 to 12/31/2011 $12.20 $12.24 753,364
------------------------------------------------------------------------------------------------------------
AST PRUDENTIAL CORE BOND PORTFOLIO
10/31/2011* to 12/31/2011 $10.02 $10.09 14,788
------------------------------------------------------------------------------------------------------------
AST QMA US EQUITY ALPHA PORTFOLIO
01/01/2002 to 12/31/2002 $12.40 $9.77 711,077
01/01/2003 to 12/31/2003 $9.77 $12.36 907,807
01/01/2004 to 12/31/2004 $12.36 $13.51 1,028,912
01/01/2005 to 12/31/2005 $13.51 $13.90 797,384
01/01/2006 to 12/31/2006 $13.90 $15.54 773,988
01/01/2007 to 12/31/2007 $15.54 $15.77 575,877
01/01/2008 to 12/31/2008 $15.77 $9.60 424,530
01/01/2009 to 12/31/2009 $9.60 $11.62 341,475
01/01/2010 to 12/31/2010 $11.62 $13.28 253,328
01/01/2011 to 12/31/2011 $13.28 $13.65 297,539
------------------------------------------------------------------------------------------------------------
AST QUANTITATIVE MODELING PORTFOLIO
05/02/2011* to 12/31/2011 $10.00 $8.96 29,745
------------------------------------------------------------------------------------------------------------
AST SCHRODERS MULTI-ASSET WORLD STRATEGIES PORTFOLIO
01/01/2002 to 12/31/2002 $14.00 $12.56 128,128
01/01/2003 to 12/31/2003 $12.56 $14.83 191,980
01/01/2004 to 12/31/2004 $14.83 $16.05 121,891
01/01/2005 to 12/31/2005 $16.05 $16.69 86,619
01/01/2006 to 12/31/2006 $16.69 $18.18 63,280
01/01/2007 to 12/31/2007 $18.18 $19.67 53,282
01/01/2008 to 12/31/2008 $19.67 $13.64 38,226
01/01/2009 to 12/31/2009 $13.64 $17.27 184,750
01/01/2010 to 12/31/2010 $17.27 $19.18 222,036
01/01/2011 to 12/31/2011 $19.18 $18.42 333,414
------------------------------------------------------------------------------------------------------------
AST SMALL-CAP GROWTH PORTFOLIO
01/01/2002 to 12/31/2002 $20.79 $13.55 242,006
01/01/2003 to 12/31/2003 $13.55 $19.55 208,990
01/01/2004 to 12/31/2004 $19.55 $18.07 150,542
01/01/2005 to 12/31/2005 $18.07 $18.22 162,829
01/01/2006 to 12/31/2006 $18.22 $20.39 112,216
01/01/2007 to 12/31/2007 $20.39 $21.70 104,978
01/01/2008 to 12/31/2008 $21.70 $14.01 112,120
01/01/2009 to 12/31/2009 $14.01 $18.64 106,361
01/01/2010 to 12/31/2010 $18.64 $25.27 118,173
01/01/2011 to 12/31/2011 $25.27 $24.86 99,273
A-10
Number of
Accumulation Accumulation Accumulation
Unit Value at Unit Value at Units Outstanding at
Sub-Accounts Beginning of Period End of Period End of Period
-------------------------------------------------------------------------------------------------------------
AST SMALL-CAP VALUE PORTFOLIO
01/01/2002 to 12/31/2002 $14.61 $13.15 680,968
01/01/2003 to 12/31/2003 $13.15 $17.74 730,928
01/01/2004 to 12/31/2004 $17.74 $20.52 607,239
01/01/2005 to 12/31/2005 $20.52 $21.74 509,489
01/01/2006 to 12/31/2006 $21.74 $25.93 436,915
01/01/2007 to 12/31/2007 $25.93 $24.32 347,488
01/01/2008 to 12/31/2008 $24.32 $16.98 321,504
01/01/2009 to 12/31/2009 $16.98 $21.43 245,898
01/01/2010 to 12/31/2010 $21.43 $26.82 207,114
01/01/2011 to 12/31/2011 $26.82 $25.05 258,889
-------------------------------------------------------------------------------------------------------------
AST T. ROWE PRICE ASSET ALLOCATION PORTFOLIO
01/01/2002 to 12/31/2002 $19.02 $17.03 155,933
01/01/2003 to 12/31/2003 $17.03 $20.98 146,224
01/01/2004 to 12/31/2004 $20.98 $23.17 187,867
01/01/2005 to 12/31/2005 $23.17 $24.10 220,128
01/01/2006 to 12/31/2006 $24.10 $26.93 215,085
01/01/2007 to 12/31/2007 $26.93 $28.45 189,265
01/01/2008 to 12/31/2008 $28.45 $20.93 171,019
01/01/2009 to 12/31/2009 $20.93 $25.82 267,652
01/01/2010 to 12/31/2010 $25.82 $28.61 287,893
01/01/2011 to 12/31/2011 $28.61 $28.99 340,345
-------------------------------------------------------------------------------------------------------------
AST T. ROWE PRICE EQUITY INCOME PORTFOLIO
FORMERLY, AST ALLIANCEBERNSTEIN CORE VALUE PORTFOLIO
01/01/2002 to 12/31/2002 $10.10 $8.70 305,648
01/01/2003 to 12/31/2003 $8.70 $11.09 387,468
01/01/2004 to 12/31/2004 $11.09 $12.55 461,239
01/01/2005 to 12/31/2005 $12.55 $13.16 393,973
01/01/2006 to 12/31/2006 $13.16 $15.87 631,031
01/01/2007 to 12/31/2007 $15.87 $15.20 433,808
01/01/2008 to 12/31/2008 $15.20 $8.78 314,575
01/01/2009 to 12/31/2009 $8.78 $10.79 289,654
01/01/2010 to 12/31/2010 $10.79 $12.14 249,180
01/01/2011 to 12/31/2011 $12.14 $11.87 271,796
-------------------------------------------------------------------------------------------------------------
AST T. ROWE PRICE GLOBAL BOND PORTFOLIO
01/01/2002 to 12/31/2002 $11.15 $12.74 585,072
01/01/2003 to 12/31/2003 $12.74 $14.28 465,034
01/01/2004 to 12/31/2004 $14.28 $15.42 590,587
01/01/2005 to 12/31/2005 $15.42 $14.63 664,641
01/01/2006 to 12/31/2006 $14.63 $15.44 739,981
01/01/2007 to 12/31/2007 $15.44 $16.82 753,697
01/01/2008 to 12/31/2008 $16.82 $16.31 596,714
01/01/2009 to 12/31/2009 $16.31 $18.16 656,098
01/01/2010 to 12/31/2010 $18.16 $19.08 519,556
01/01/2011 to 12/31/2011 $19.08 $19.74 534,071
A-11
Number of
Accumulation Accumulation Accumulation
Unit Value at Unit Value at Units Outstanding at
Sub-Accounts Beginning of Period End of Period End of Period
------------------------------------------------------------------------------------------------------------
AST T. ROWE PRICE LARGE-CAP GROWTH PORTFOLIO
01/01/2002 to 12/31/2002 $15.21 $10.43 210,924
01/01/2003 to 12/31/2003 $10.43 $12.82 108,170
01/01/2004 to 12/31/2004 $12.82 $13.47 90,747
01/01/2005 to 12/31/2005 $13.47 $15.58 274,763
01/01/2006 to 12/31/2006 $15.58 $16.35 187,054
01/01/2007 to 12/31/2007 $16.35 $17.58 243,724
01/01/2008 to 12/31/2008 $17.58 $10.38 199,553
01/01/2009 to 12/31/2009 $10.38 $15.82 298,151
01/01/2010 to 12/31/2010 $15.82 $18.20 297,817
01/01/2011 to 12/31/2011 $18.20 $17.77 291,980
------------------------------------------------------------------------------------------------------------
AST T. ROWE PRICE NATURAL RESOURCES PORTFOLIO
01/01/2002 to 12/31/2002 $20.62 $19.36 108,448
01/01/2003 to 12/31/2003 $19.36 $25.68 203,866
01/01/2004 to 12/31/2004 $25.68 $33.46 203,341
01/01/2005 to 12/31/2005 $33.46 $43.69 299,506
01/01/2006 to 12/31/2006 $43.69 $50.29 233,412
01/01/2007 to 12/31/2007 $50.29 $70.20 197,973
01/01/2008 to 12/31/2008 $70.20 $34.88 129,286
01/01/2009 to 12/31/2009 $34.88 $51.76 127,896
01/01/2010 to 12/31/2010 $51.76 $61.94 135,627
01/01/2011 to 12/31/2011 $61.94 $52.36 113,019
------------------------------------------------------------------------------------------------------------
AST WELLINGTON MANAGEMENT HEDGED EQUITY PORTFOLIO
FORMERLY, AST AGGRESSIVE ASSET ALLOCATION PORTFOLIO
12/05/2005* to 12/31/2005 $10.00 $10.01 17,259
01/01/2006 to 12/31/2006 $10.01 $11.50 40,270
01/01/2007 to 12/31/2007 $11.50 $12.52 119,072
01/01/2008 to 12/31/2008 $12.52 $7.17 109,310
01/01/2009 to 12/31/2009 $7.17 $9.15 143,627
01/01/2010 to 12/31/2010 $9.15 $10.42 177,034
01/01/2011 to 12/31/2011 $10.42 $10.00 216,577
------------------------------------------------------------------------------------------------------------
AST WESTERN ASSET CORE PLUS BOND PORTFOLIO
11/19/2007* to 12/31/2007 $10.00 $9.99 0
01/01/2008 to 12/31/2008 $9.99 $9.41 107,796
01/01/2009 to 12/31/2009 $9.41 $10.44 93,700
01/01/2010 to 12/31/2010 $10.44 $11.18 232,193
01/01/2011 to 12/31/2011 $11.18 $11.77 465,616
------------------------------------------------------------------------------------------------------------
EVERGREEN VA GROWTH FUND
04/15/2005* to 12/31/2005 $9.82 $11.52 168,369
01/01/2006 to 12/31/2006 $11.52 $12.71 120,112
01/01/2007 to 12/31/2007 $12.71 $14.02 92,906
01/01/2008 to 12/31/2008 $14.02 $8.20 66,630
01/01/2009 to 12/31/2009 $8.20 $11.39 75,801
01/01/2010 to 07/16/2010 $11.39 $11.21 0
A-12
Number of
Accumulation Accumulation Accumulation
Unit Value at Unit Value at Units Outstanding at
Sub-Accounts Beginning of Period End of Period End of Period
-------------------------------------------------------------------------------------------------------------
EVERGREEN VA INTERNATIONAL EQUITY FUND
01/01/2002 to 12/31/2002 $9.16 $7.25 15,780
01/01/2003 to 12/31/2003 $7.25 $10.46 38,062
01/01/2004 to 12/31/2004 $10.46 $12.39 50,975
01/01/2005 to 12/31/2005 $12.39 $14.28 132,883
01/01/2006 to 12/31/2006 $14.28 $17.47 147,897
01/01/2007 to 12/31/2007 $17.47 $19.96 124,848
01/01/2008 to 12/31/2008 $19.96 $11.60 104,738
01/01/2009 to 12/31/2009 $11.60 $13.36 93,797
01/01/2010 to 07/16/2010 $13.36 $12.76 0
-------------------------------------------------------------------------------------------------------------
EVERGREEN VA OMEGA FUND
01/01/2002 to 12/31/2002 $9.08 $6.73 1,695
01/01/2003 to 12/31/2003 $6.73 $9.36 34,638
01/01/2004 to 12/31/2004 $9.36 $9.97 57,316
01/01/2005 to 12/31/2005 $9.97 $10.29 41,101
01/01/2006 to 12/31/2006 $10.29 $10.84 12,285
01/01/2007 to 12/31/2007 $10.84 $12.05 13,637
01/01/2008 to 12/31/2008 $12.05 $8.72 16,234
01/01/2009 to 12/31/2009 $8.72 $12.47 74,540
01/01/2010 to 07/16/2010 $12.47 $11.71 0
-------------------------------------------------------------------------------------------------------------
FIRST TRUST TARGET FOCUS FOUR PORTFOLIO
01/01/2002 to 12/31/2002 $4.77 $2.99 42,562
01/01/2003 to 12/31/2003 $2.99 -- 0
01/01/2004 to 12/31/2004 -- $4.50 28,099
01/01/2005 to 12/31/2005 $4.50 $4.50 23,414
01/01/2006 to 12/31/2006 $4.50 $4.65 23,015
01/01/2007 to 12/31/2007 $4.65 $4.88 33,437
01/01/2008 to 12/31/2008 $4.88 $2.73 18,489
01/01/2009 to 12/31/2009 $2.73 $3.49 9,104
01/01/2010 to 12/31/2010 $3.49 $4.12 5,973
01/01/2011 to 12/31/2011 $4.12 $3.65 11,511
-------------------------------------------------------------------------------------------------------------
FRANKLIN TEMPLETON VIP FOUNDING FUNDS ALLOCATION FUND
05/01/2008* to 12/31/2008 $10.08 $6.69 10,986
01/01/2009 to 12/31/2009 $6.69 $8.64 243,261
01/01/2010 to 12/31/2010 $8.64 $9.47 334,148
01/01/2011 to 12/31/2011 $9.47 $9.25 585,799
-------------------------------------------------------------------------------------------------------------
GLOBAL DIVIDEND TARGET 15 PORTFOLIO
01/01/2004 to 12/31/2004 -- $11.93 4,880
01/01/2005 to 12/31/2005 $11.93 $13.06 37,527
01/01/2006 to 12/31/2006 $13.06 $17.96 112,508
01/01/2007 to 12/31/2007 $17.96 $20.22 97,633
01/01/2008 to 12/31/2008 $20.22 $11.49 36,039
01/01/2009 to 12/31/2009 $11.49 $16.11 27,845
01/01/2010 to 12/31/2010 $16.11 $17.56 18,208
01/01/2011 to 12/31/2011 $17.56 $16.14 20,926
-------------------------------------------------------------------------------------------------------------
INVESCO V.I. CAPITAL DEVELOPMENT FUND
04/29/2011* to 12/31/2011 $10.03 $8.23 43,206
-------------------------------------------------------------------------------------------------------------
INVESCO V.I. DIVIDEND GROWTH FUND
04/29/2011* to 12/31/2011 $9.99 $9.18 16,301
A-13
Number of
Accumulation Accumulation Accumulation
Unit Value at Unit Value at Units Outstanding at
Sub-Accounts Beginning of Period End of Period End of Period
--------------------------------------------------------------------------------------------
INVESCO V.I. DYNAMICS FUND
01/01/2002 to 12/31/2002 $9.13 $6.18 135,486
01/01/2003 to 12/31/2003 $6.18 $8.46 159,239
01/01/2004 to 12/31/2004 $8.46 $9.53 88,195
01/01/2005 to 12/31/2005 $9.53 $10.48 96,278
01/01/2006 to 12/31/2006 $10.48 $12.09 107,342
01/01/2007 to 12/31/2007 $12.09 $13.48 107,103
01/01/2008 to 12/31/2008 $13.48 $6.95 72,963
01/01/2009 to 12/31/2009 $6.95 $9.84 46,177
01/01/2010 to 12/31/2010 $9.84 $12.10 76,251
01/01/2011 to 04/29/2011 $12.10 $13.52 0
--------------------------------------------------------------------------------------------
INVESCO V.I. FINANCIAL SERVICES FUND
01/01/2002 to 12/31/2002 $12.69 $10.73 137,142
01/01/2003 to 12/31/2003 $10.73 $13.81 153,732
01/01/2004 to 12/31/2004 $13.81 $14.91 89,216
01/01/2005 to 12/31/2005 $14.91 $15.69 71,885
01/01/2006 to 12/31/2006 $15.69 $18.15 56,423
01/01/2007 to 12/31/2007 $18.15 $14.02 47,002
01/01/2008 to 12/31/2008 $14.02 $5.65 59,490
01/01/2009 to 12/31/2009 $5.65 $7.15 52,380
01/01/2010 to 12/31/2010 $7.15 $7.84 66,388
01/01/2011 to 04/29/2011 $7.84 $8.30 0
--------------------------------------------------------------------------------------------
INVESCO V.I. GLOBAL HEALTH CARE FUND
01/01/2002 to 12/31/2002 $12.79 $9.60 238,488
01/01/2003 to 12/31/2003 $9.60 $12.19 194,661
01/01/2004 to 12/31/2004 $12.19 $13.03 171,635
01/01/2005 to 12/31/2005 $13.03 $14.00 175,050
01/01/2006 to 12/31/2006 $14.00 $14.63 174,695
01/01/2007 to 12/31/2007 $14.63 $16.26 114,917
01/01/2008 to 12/31/2008 $16.26 $11.53 91,348
01/01/2009 to 12/31/2009 $11.53 $14.63 54,042
01/01/2010 to 12/31/2010 $14.63 $15.30 47,264
01/01/2011 to 12/31/2011 $15.30 $15.80 38,715
--------------------------------------------------------------------------------------------
INVESCO V.I. TECHNOLOGY FUND
01/01/2002 to 12/31/2002 $6.78 $3.58 265,726
01/01/2003 to 12/31/2003 $3.58 $5.17 226,147
01/01/2004 to 12/31/2004 $5.17 $5.37 283,479
01/01/2005 to 12/31/2005 $5.37 $5.45 241,083
01/01/2006 to 12/31/2006 $5.45 $5.98 129,711
01/01/2007 to 12/31/2007 $5.98 $6.40 158,698
01/01/2008 to 12/31/2008 $6.40 $3.53 103,795
01/01/2009 to 12/31/2009 $3.53 $5.52 150,122
01/01/2010 to 12/31/2010 $5.52 $6.65 167,602
01/01/2011 to 12/31/2011 $6.65 $6.27 72,392
A-14
Number of
Accumulation Accumulation Accumulation
Unit Value at Unit Value at Units Outstanding at
Sub-Accounts Beginning of Period End of Period End of Period
---------------------------------------------------------------------------------------
NASDAQ TARGET 15 PORTFOLIO
01/01/2004 to 12/31/2004 -- $10.73 2,813
01/01/2005 to 12/31/2005 $10.73 $11.01 1,235
01/01/2006 to 12/31/2006 $11.01 $11.91 3,143
01/01/2007 to 12/31/2007 $11.91 $14.41 1,392
01/01/2008 to 12/31/2008 $14.41 $7.03 427
01/01/2009 to 12/31/2009 $7.03 $8.17 3,249
01/01/2010 to 12/31/2010 $8.17 $10.58 16,972
01/01/2011 to 12/31/2011 $10.58 $10.65 1,249
---------------------------------------------------------------------------------------
NVIT DEVELOPING MARKETS FUND
01/01/2002 to 12/31/2002 $6.77 $6.07 337,154
01/01/2003 to 12/31/2003 $6.07 $9.63 979,994
01/01/2004 to 12/31/2004 $9.63 $11.46 714,218
01/01/2005 to 12/31/2005 $11.46 $14.98 823,016
01/01/2006 to 12/31/2006 $14.98 $20.03 651,495
01/01/2007 to 12/31/2007 $20.03 $28.55 451,444
01/01/2008 to 12/31/2008 $28.55 $11.95 277,530
01/01/2009 to 12/31/2009 $11.95 $19.27 374,898
01/01/2010 to 12/31/2010 $19.27 $22.23 260,091
01/01/2011 to 12/31/2011 $22.23 $17.14 181,621
---------------------------------------------------------------------------------------
PROFUND VP ASIA 30
01/01/2002 to 12/31/2002 -- $7.80 18,518
01/01/2003 to 12/31/2003 $7.80 $12.78 160,378
01/01/2004 to 12/31/2004 $12.78 $12.63 124,486
01/01/2005 to 12/31/2005 $12.63 $15.00 195,167
01/01/2006 to 12/31/2006 $15.00 $20.76 420,714
01/01/2007 to 12/31/2007 $20.76 $30.47 216,739
01/01/2008 to 12/31/2008 $30.47 $14.89 119,027
01/01/2009 to 12/31/2009 $14.89 $22.80 105,129
01/01/2010 to 12/31/2010 $22.80 $25.81 64,976
01/01/2011 to 12/31/2011 $25.81 $18.72 36,742
---------------------------------------------------------------------------------------
PROFUND VP BANKS
01/01/2002 to 12/31/2002 -- $8.62 6,455
01/01/2003 to 12/31/2003 $8.62 $11.08 20,188
01/01/2004 to 12/31/2004 $11.08 $12.31 165,023
01/01/2005 to 12/31/2005 $12.31 $12.21 41,059
01/01/2006 to 12/31/2006 $12.21 $14.00 31,140
01/01/2007 to 12/31/2007 $14.00 $10.11 77,170
01/01/2008 to 12/31/2008 $10.11 $5.33 79,380
01/01/2009 to 12/31/2009 $5.33 $5.08 13,216
01/01/2010 to 12/31/2010 $5.08 $5.46 26,509
01/01/2011 to 12/31/2011 $5.46 $3.98 64,401
A-15
Number of
Accumulation Accumulation Accumulation
Unit Value at Unit Value at Units Outstanding at
Sub-Accounts Beginning of Period End of Period End of Period
---------------------------------------------------------------------------------------
PROFUND VP BASIC MATERIALS
01/01/2002 to 12/31/2002 -- $8.52 11,440
01/01/2003 to 12/31/2003 $8.52 $11.13 253,494
01/01/2004 to 12/31/2004 $11.13 $12.19 167,864
01/01/2005 to 12/31/2005 $12.19 $12.41 122,655
01/01/2006 to 12/31/2006 $12.41 $14.23 48,875
01/01/2007 to 12/31/2007 $14.23 $18.48 144,781
01/01/2008 to 12/31/2008 $18.48 $8.92 51,496
01/01/2009 to 12/31/2009 $8.92 $14.39 86,863
01/01/2010 to 12/31/2010 $14.39 $18.54 120,512
01/01/2011 to 12/31/2011 $18.54 $15.45 31,865
---------------------------------------------------------------------------------------
PROFUND VP BEAR
01/01/2002 to 12/31/2002 $11.62 $13.95 217,878
01/01/2003 to 12/31/2003 $13.95 $10.45 196,473
01/01/2004 to 12/31/2004 $10.45 $9.31 98,354
01/01/2005 to 12/31/2005 $9.31 $9.13 159,128
01/01/2006 to 12/31/2006 $9.13 $8.39 131,467
01/01/2007 to 12/31/2007 $8.39 $8.38 160,574
01/01/2008 to 12/31/2008 $8.38 $11.65 132,441
01/01/2009 to 12/31/2009 $11.65 $8.35 169,595
01/01/2010 to 12/31/2010 $8.35 $6.82 157,509
01/01/2011 to 12/31/2011 $6.82 $6.17 92,863
---------------------------------------------------------------------------------------
PROFUND VP BIOTECHNOLOGY
01/01/2002 to 12/31/2002 $8.43 $5.23 111,468
01/01/2003 to 12/31/2003 $5.23 $7.27 49,177
01/01/2004 to 12/31/2004 $7.27 $7.92 133,501
01/01/2005 to 12/31/2005 $7.92 $9.38 118,019
01/01/2006 to 12/31/2006 $9.38 $8.94 44,623
01/01/2007 to 12/31/2007 $8.94 $8.78 90,864
01/01/2008 to 12/31/2008 $8.78 $8.88 63,099
01/01/2009 to 12/31/2009 $8.88 $9.15 25,851
01/01/2010 to 12/31/2010 $9.15 $9.56 21,825
01/01/2011 to 12/31/2011 $9.56 $10.12 22,081
---------------------------------------------------------------------------------------
PROFUND VP BULL
01/01/2002 to 12/31/2002 -- $8.02 153,898
01/01/2003 to 12/31/2003 $8.02 $10.01 404,601
01/01/2004 to 12/31/2004 $10.01 $10.82 617,953
01/01/2005 to 12/31/2005 $10.82 $11.04 546,041
01/01/2006 to 12/31/2006 $11.04 $12.47 745,548
01/01/2007 to 12/31/2007 $12.47 $12.83 453,952
01/01/2008 to 12/31/2008 $12.83 $7.95 385,793
01/01/2009 to 12/31/2009 $7.95 $9.82 348,697
01/01/2010 to 12/31/2010 $9.82 $10.98 197,958
01/01/2011 to 12/31/2011 $10.98 $10.91 239,253
A-16
Number of
Accumulation Accumulation Accumulation
Unit Value at Unit Value at Units Outstanding at
Sub-Accounts Beginning of Period End of Period End of Period
-------------------------------------------------------------------------------------------
PROFUND VP CONSUMER GOODS PORTFOLIO
01/01/2002 to 12/31/2002 -- $8.33 9,203
01/01/2003 to 12/31/2003 $8.33 $9.81 11,486
01/01/2004 to 12/31/2004 $9.81 $10.65 24,590
01/01/2005 to 12/31/2005 $10.65 $10.54 31,221
01/01/2006 to 12/31/2006 $10.54 $11.79 62,550
01/01/2007 to 12/31/2007 $11.79 $12.60 98,869
01/01/2008 to 12/31/2008 $12.60 $9.18 50,556
01/01/2009 to 12/31/2009 $9.18 $11.08 30,221
01/01/2010 to 12/31/2010 $11.08 $12.92 14,175
01/01/2011 to 12/31/2011 $12.92 $13.73 47,536
-------------------------------------------------------------------------------------------
PROFUND VP CONSUMER SERVICES
01/01/2002 to 12/31/2002 -- $7.29 14,792
01/01/2003 to 12/31/2003 $7.29 $9.19 24,982
01/01/2004 to 12/31/2004 $9.19 $9.82 195,868
01/01/2005 to 12/31/2005 $9.82 $9.30 3,605
01/01/2006 to 12/31/2006 $9.30 $10.35 45,532
01/01/2007 to 12/31/2007 $10.35 $9.44 3,176
01/01/2008 to 12/31/2008 $9.44 $6.43 28,031
01/01/2009 to 12/31/2009 $6.43 $8.36 15,824
01/01/2010 to 12/31/2010 $8.36 $10.08 41,369
01/01/2011 to 12/31/2011 $10.08 $10.57 29,476
-------------------------------------------------------------------------------------------
PROFUND VP EUROPE 30
01/01/2002 to 12/31/2002 $8.01 $5.91 26,656
01/01/2003 to 12/31/2003 $5.91 $8.14 413,959
01/01/2004 to 12/31/2004 $8.14 $9.24 328,575
01/01/2005 to 12/31/2005 $9.24 $9.93 249,354
01/01/2006 to 12/31/2006 $9.93 $11.59 333,482
01/01/2007 to 12/31/2007 $11.59 $13.19 238,121
01/01/2008 to 12/31/2008 $13.19 $7.34 137,834
01/01/2009 to 12/31/2009 $7.34 $9.65 228,971
01/01/2010 to 12/31/2010 $9.65 $9.84 216,942
01/01/2011 to 12/31/2011 $9.84 $8.90 93,529
-------------------------------------------------------------------------------------------
PROFUND VP FINANCIALS
01/01/2002 to 12/31/2002 $9.28 $7.85 31,033
01/01/2003 to 12/31/2003 $7.85 $10.06 28,956
01/01/2004 to 12/31/2004 $10.06 $11.03 259,356
01/01/2005 to 12/31/2005 $11.03 $11.39 154,652
01/01/2006 to 12/31/2006 $11.39 $13.28 128,282
01/01/2007 to 12/31/2007 $13.28 $10.67 96,858
01/01/2008 to 12/31/2008 $10.67 $5.24 11,366
01/01/2009 to 12/31/2009 $5.24 $5.99 7,431
01/01/2010 to 12/31/2010 $5.99 $6.60 40,821
01/01/2011 to 12/31/2011 $6.60 $5.65 100,821
A-17
Number of
Accumulation Accumulation Accumulation
Unit Value at Unit Value at Units Outstanding at
Sub-Accounts Beginning of Period End of Period End of Period
---------------------------------------------------------------------------------------
PROFUND VP HEALTH CARE
01/01/2002 to 12/31/2002 $9.42 $7.23 76,140
01/01/2003 to 12/31/2003 $7.23 $8.44 57,417
01/01/2004 to 12/31/2004 $8.44 $8.58 342,154
01/01/2005 to 12/31/2005 $8.58 $9.04 121,611
01/01/2006 to 12/31/2006 $9.04 $9.45 256,066
01/01/2007 to 12/31/2007 $9.45 $10.01 159,903
01/01/2008 to 12/31/2008 $10.01 $7.53 85,439
01/01/2009 to 12/31/2009 $7.53 $8.94 96,701
01/01/2010 to 12/31/2010 $8.94 $9.14 64,312
01/01/2011 to 12/31/2011 $9.14 $10.00 62,877
---------------------------------------------------------------------------------------
PROFUND VP INDUSTRIALS
01/01/2003 to 12/31/2003 -- $10.18 41,864
01/01/2004 to 12/31/2004 $10.18 $11.45 23,756
01/01/2005 to 12/31/2005 $11.45 $11.66 18,140
01/01/2006 to 12/31/2006 $11.66 $12.93 30,797
01/01/2007 to 12/31/2007 $12.93 $14.35 33,623
01/01/2008 to 12/31/2008 $14.35 $8.48 47,228
01/01/2009 to 12/31/2009 $8.48 $10.46 33,037
01/01/2010 to 12/31/2010 $10.46 $12.86 38,388
01/01/2011 to 12/31/2011 $12.86 $12.55 21,421
---------------------------------------------------------------------------------------
PROFUND VP INTERNET
01/01/2002 to 12/31/2002 -- $8.63 53,814
01/01/2003 to 12/31/2003 $8.63 $15.25 54,786
01/01/2004 to 12/31/2004 $15.25 $18.38 181,598
01/01/2005 to 12/31/2005 $18.38 $19.61 77,547
01/01/2006 to 12/31/2006 $19.61 $19.75 28,931
01/01/2007 to 12/31/2007 $19.75 $21.62 14,734
01/01/2008 to 12/31/2008 $21.62 $11.85 2,967
01/01/2009 to 12/31/2009 $11.85 $20.87 26,581
01/01/2010 to 12/31/2010 $20.87 $28.05 29,749
01/01/2011 to 12/31/2011 $28.05 $25.95 3,903
---------------------------------------------------------------------------------------
PROFUND VP JAPAN
01/01/2002 to 12/31/2002 -- $7.29 3,411
01/01/2003 to 12/31/2003 $7.29 $9.18 64,887
01/01/2004 to 12/31/2004 $9.18 $9.81 333,037
01/01/2005 to 12/31/2005 $9.81 $13.82 762,071
01/01/2006 to 12/31/2006 $13.82 $15.21 143,153
01/01/2007 to 12/31/2007 $15.21 $13.60 114,157
01/01/2008 to 12/31/2008 $13.60 $8.00 87,692
01/01/2009 to 12/31/2009 $8.00 $8.76 71,295
01/01/2010 to 12/31/2010 $8.76 $8.14 79,399
01/01/2011 to 12/31/2011 $8.14 $6.59 56,188
---------------------------------------------------------------------------------------
PROFUND VP LARGE-CAP GROWTH
01/01/2005 to 12/31/2005 $10.39 $10.42 410,301
01/01/2006 to 12/31/2006 $10.42 $11.29 229,253
01/01/2007 to 12/31/2007 $11.29 $11.99 325,310
01/01/2008 to 12/31/2008 $11.99 $7.68 142,795
01/01/2009 to 12/31/2009 $7.68 $9.90 134,679
01/01/2010 to 12/31/2010 $9.90 $11.13 110,087
01/01/2011 to 12/31/2011 $11.13 $11.41 73,498
A-18
Number of
Accumulation Accumulation Accumulation
Unit Value at Unit Value at Units Outstanding at
Sub-Accounts Beginning of Period End of Period End of Period
---------------------------------------------------------------------------------------
PROFUND VP LARGE-CAP VALUE
01/01/2005 to 12/31/2005 $10.38 $10.62 401,522
01/01/2006 to 12/31/2006 $10.62 $12.53 445,563
01/01/2007 to 12/31/2007 $12.53 $12.46 289,042
01/01/2008 to 12/31/2008 $12.46 $7.37 296,410
01/01/2009 to 12/31/2009 $7.37 $8.75 120,009
01/01/2010 to 12/31/2010 $8.75 $9.81 153,722
01/01/2011 to 12/31/2011 $9.81 $9.62 104,799
---------------------------------------------------------------------------------------
PROFUND VP MID-CAP GROWTH
01/01/2002 to 12/31/2002 -- $7.75 21,813
01/01/2003 to 12/31/2003 $7.75 $9.85 150,991
01/01/2004 to 12/31/2004 $9.85 $10.87 181,124
01/01/2005 to 12/31/2005 $10.87 $12.01 274,072
01/01/2006 to 12/31/2006 $12.01 $12.41 118,715
01/01/2007 to 12/31/2007 $12.41 $13.78 108,048
01/01/2008 to 12/31/2008 $13.78 $8.38 125,598
01/01/2009 to 12/31/2009 $8.38 $11.51 97,535
01/01/2010 to 12/31/2010 $11.51 $14.68 133,506
01/01/2011 to 12/31/2011 $14.68 $14.17 115,872
---------------------------------------------------------------------------------------
PROFUND VP MID-CAP VALUE
01/01/2002 to 12/31/2002 -- $7.72 28,913
01/01/2003 to 12/31/2003 $7.72 $10.41 192,966
01/01/2004 to 12/31/2004 $10.41 $11.99 364,242
01/01/2005 to 12/31/2005 $11.99 $12.96 260,627
01/01/2006 to 12/31/2006 $12.96 $14.46 176,362
01/01/2007 to 12/31/2007 $14.46 $14.51 150,294
01/01/2008 to 12/31/2008 $14.51 $9.18 89,722
01/01/2009 to 12/31/2009 $9.18 $11.94 51,593
01/01/2010 to 12/31/2010 $11.94 $14.29 86,221
01/01/2011 to 12/31/2011 $14.29 $13.64 108,559
---------------------------------------------------------------------------------------
PROFUND VP NASDAQ-100
01/01/2002 to 12/31/2002 $5.81 $3.54 520,310
01/01/2003 to 12/31/2003 $3.54 $5.16 729,288
01/01/2004 to 12/31/2004 $5.16 $5.57 629,788
01/01/2005 to 12/31/2005 $5.57 $5.54 310,844
01/01/2006 to 12/31/2006 $5.54 $5.81 380,108
01/01/2007 to 12/31/2007 $5.81 $6.78 511,665
01/01/2008 to 12/31/2008 $6.78 $3.88 246,969
01/01/2009 to 12/31/2009 $3.88 $5.86 239,318
01/01/2010 to 12/31/2010 $5.86 $6.88 194,817
01/01/2011 to 12/31/2011 $6.88 $6.93 174,746
---------------------------------------------------------------------------------------
PROFUND VP OIL & GAS
01/01/2002 to 12/31/2002 $9.25 $7.63 148,807
01/01/2003 to 12/31/2003 $7.63 $9.26 336,748
01/01/2004 to 12/31/2004 $9.26 $11.91 247,649
01/01/2005 to 12/31/2005 $11.91 $15.53 373,876
01/01/2006 to 12/31/2006 $15.53 $18.61 197,658
01/01/2007 to 12/31/2007 $18.61 $24.50 179,791
01/01/2008 to 12/31/2008 $24.50 $15.35 161,700
01/01/2009 to 12/31/2009 $15.35 $17.61 93,722
01/01/2010 to 12/31/2010 $17.61 $20.60 90,486
01/01/2011 to 12/31/2011 $20.60 $20.93 65,808
A-19
Number of
Accumulation Accumulation Accumulation
Unit Value at Unit Value at Units Outstanding at
Sub-Accounts Beginning of Period End of Period End of Period
-------------------------------------------------------------------------------------------
PROFUND VP PHARMACEUTICALS
01/01/2002 to 12/31/2002 -- $8.62 9,411
01/01/2003 to 12/31/2003 $8.62 $9.04 81,004
01/01/2004 to 12/31/2004 $9.04 $8.15 41,607
01/01/2005 to 12/31/2005 $8.15 $7.79 48,716
01/01/2006 to 12/31/2006 $7.79 $8.68 78,989
01/01/2007 to 12/31/2007 $8.68 $8.83 19,524
01/01/2008 to 12/31/2008 $8.83 $7.06 29,645
01/01/2009 to 12/31/2009 $7.06 $8.20 63,349
01/01/2010 to 12/31/2010 $8.20 $8.18 20,260
01/01/2011 to 12/31/2011 $8.18 $9.44 45,320
-------------------------------------------------------------------------------------------
PROFUND VP PRECIOUS METALS
01/01/2002 to 12/31/2002 -- $9.77 395,037
01/01/2003 to 12/31/2003 $9.77 $13.52 315,457
01/01/2004 to 12/31/2004 $13.52 $12.10 406,661
01/01/2005 to 12/31/2005 $12.10 $15.18 479,530
01/01/2006 to 12/31/2006 $15.18 $16.19 535,374
01/01/2007 to 12/31/2007 $16.19 $19.70 278,711
01/01/2008 to 12/31/2008 $19.70 $13.55 600,392
01/01/2009 to 12/31/2009 $13.55 $18.22 363,944
01/01/2010 to 12/31/2010 $18.22 $24.06 262,730
01/01/2011 to 12/31/2011 $24.06 $19.31 177,602
-------------------------------------------------------------------------------------------
PROFUND VP REAL ESTATE
01/01/2002 to 12/31/2002 $10.84 $10.77 32,985
01/01/2003 to 12/31/2003 $10.77 $14.25 116,140
01/01/2004 to 12/31/2004 $14.25 $18.01 216,703
01/01/2005 to 12/31/2005 $18.01 $19.10 37,850
01/01/2006 to 12/31/2006 $19.10 $25.14 80,333
01/01/2007 to 12/31/2007 $25.14 $20.08 24,481
01/01/2008 to 12/31/2008 $20.08 $11.72 10,163
01/01/2009 to 12/31/2009 $11.72 $14.89 24,836
01/01/2010 to 12/31/2010 $14.89 $18.44 29,882
01/01/2011 to 12/31/2011 $18.44 $19.19 33,480
-------------------------------------------------------------------------------------------
PROFUND VP RISING RATES OPPORTUNITY
01/01/2002 to 12/31/2002 -- $8.07 126,238
01/01/2003 to 12/31/2003 $8.07 $7.69 217,316
01/01/2004 to 12/31/2004 $7.69 $6.81 888,013
01/01/2005 to 12/31/2005 $6.81 $6.23 566,024
01/01/2006 to 12/31/2006 $6.23 $6.82 255,289
01/01/2007 to 12/31/2007 $6.82 $6.42 211,288
01/01/2008 to 12/31/2008 $6.42 $3.96 414,255
01/01/2009 to 12/31/2009 $3.96 $5.20 156,158
01/01/2010 to 12/31/2010 $5.20 $4.33 355,164
01/01/2011 to 12/31/2011 $4.33 $2.69 158,578
A-20
Number of
Accumulation Accumulation Accumulation
Unit Value at Unit Value at Units Outstanding at
Sub-Accounts Beginning of Period End of Period End of Period
---------------------------------------------------------------------------------------
PROFUND VP SEMICONDUCTOR
01/01/2002 to 12/31/2002 -- $5.17 33,410
01/01/2003 to 12/31/2003 $5.17 $9.67 51,652
01/01/2004 to 12/31/2004 $9.67 $7.35 98,700
01/01/2005 to 12/31/2005 $7.35 $7.93 79,040
01/01/2006 to 12/31/2006 $7.93 $7.32 98,783
01/01/2007 to 12/31/2007 $7.32 $7.79 139,175
01/01/2008 to 12/31/2008 $7.79 $3.88 999
01/01/2009 to 12/31/2009 $3.88 $6.33 71,678
01/01/2010 to 12/31/2010 $6.33 $7.07 17,479
01/01/2011 to 12/31/2011 $7.07 $6.75 7,263
---------------------------------------------------------------------------------------
PROFUND VP SHORT MID-CAP
01/01/2004 to 12/31/2004 -- $9.71 11,369
01/01/2005 to 12/31/2005 $9.71 $8.73 32,585
01/01/2006 to 12/31/2006 $8.73 $8.36 302,256
01/01/2007 to 12/31/2007 $8.36 $8.07 6,106
01/01/2008 to 12/31/2008 $8.07 $10.57 54,520
01/01/2009 to 12/31/2009 $10.57 $6.78 14,254
01/01/2010 to 12/31/2010 $6.78 $5.00 4,659
01/01/2011 to 12/31/2011 $5.00 $4.56 136,521
---------------------------------------------------------------------------------------
PROFUND VP SHORT NASDAQ-100
01/01/2002 to 12/31/2002 -- $11.07 119,355
01/01/2003 to 12/31/2003 $11.07 $6.90 164,801
01/01/2004 to 12/31/2004 $6.90 $6.09 92,529
01/01/2005 to 12/31/2005 $6.09 $6.10 430,497
01/01/2006 to 12/31/2006 $6.10 $5.98 247,455
01/01/2007 to 12/31/2007 $5.98 $5.25 59,572
01/01/2008 to 12/31/2008 $5.25 $7.73 28,572
01/01/2009 to 12/31/2009 $7.73 $4.56 33,818
01/01/2010 to 12/31/2010 $4.56 $3.57 65,376
01/01/2011 to 12/31/2011 $3.57 $3.18 164,361
---------------------------------------------------------------------------------------
PROFUND VP SHORT SMALL-CAP
01/01/2004 to 12/31/2004 -- $9.55 12,042
01/01/2005 to 12/31/2005 $9.55 $9.21 306,257
01/01/2006 to 12/31/2006 $9.21 $8.07 327,704
01/01/2007 to 12/31/2007 $8.07 $8.38 28,374
01/01/2008 to 12/31/2008 $8.38 $10.34 61,805
01/01/2009 to 12/31/2009 $10.34 $6.94 338,038
01/01/2010 to 12/31/2010 $6.94 $4.90 85,166
01/01/2011 to 12/31/2011 $4.90 $4.43 182,665
---------------------------------------------------------------------------------------
PROFUND VP SMALL-CAP GROWTH
01/01/2002 to 12/31/2002 -- $7.75 89,346
01/01/2003 to 12/31/2003 $7.75 $10.34 184,649
01/01/2004 to 12/31/2004 $10.34 $12.30 427,343
01/01/2005 to 12/31/2005 $12.30 $13.14 196,877
01/01/2006 to 12/31/2006 $13.14 $14.19 68,601
01/01/2007 to 12/31/2007 $14.19 $14.67 55,924
01/01/2008 to 12/31/2008 $14.67 $9.61 185,844
01/01/2009 to 12/31/2009 $9.61 $12.05 72,319
01/01/2010 to 12/31/2010 $12.05 $15.05 164,770
01/01/2011 to 12/31/2011 $15.05 $15.15 77,109
A-21
Number of
Accumulation Accumulation Accumulation
Unit Value at Unit Value at Units Outstanding at
Sub-Accounts Beginning of Period End of Period End of Period
---------------------------------------------------------------------------------------
PROFUND VP SMALL-CAP VALUE
01/01/2002 to 12/31/2002 -- $7.14 99,422
01/01/2003 to 12/31/2003 $7.14 $9.55 346,508
01/01/2004 to 12/31/2004 $9.55 $11.40 585,857
01/01/2005 to 12/31/2005 $11.40 $11.78 112,028
01/01/2006 to 12/31/2006 $11.78 $13.74 170,318
01/01/2007 to 12/31/2007 $13.74 $12.67 78,556
01/01/2008 to 12/31/2008 $12.67 $8.72 69,194
01/01/2009 to 12/31/2009 $8.72 $10.43 28,683
01/01/2010 to 12/31/2010 $10.43 $12.66 38,292
01/01/2011 to 12/31/2011 $12.66 $12.06 81,938
---------------------------------------------------------------------------------------
PROFUND VP TECHNOLOGY
01/01/2002 to 12/31/2002 $5.95 $3.51 48,717
01/01/2003 to 12/31/2003 $3.51 $5.09 83,329
01/01/2004 to 12/31/2004 $5.09 $5.03 201,017
01/01/2005 to 12/31/2005 $5.03 $5.06 103,649
01/01/2006 to 12/31/2006 $5.06 $5.43 67,983
01/01/2007 to 12/31/2007 $5.43 $6.18 147,187
01/01/2008 to 12/31/2008 $6.18 $3.41 67,686
01/01/2009 to 12/31/2009 $3.41 $5.48 140,984
01/01/2010 to 12/31/2010 $5.48 $6.03 110,846
01/01/2011 to 12/31/2011 $6.03 $5.90 106,317
---------------------------------------------------------------------------------------
PROFUND VP TELECOMMUNICATIONS
01/01/2002 to 12/31/2002 $7.15 $4.41 65,796
01/01/2003 to 12/31/2003 $4.41 $4.49 56,454
01/01/2004 to 12/31/2004 $4.49 $5.16 233,182
01/01/2005 to 12/31/2005 $5.16 $4.78 64,560
01/01/2006 to 12/31/2006 $4.78 $6.38 324,251
01/01/2007 to 12/31/2007 $6.38 $6.87 82,751
01/01/2008 to 12/31/2008 $6.87 $4.48 113,728
01/01/2009 to 12/31/2009 $4.48 $4.77 11,577
01/01/2010 to 12/31/2010 $4.77 $5.49 95,233
01/01/2011 to 12/31/2011 $5.49 $5.55 8,340
---------------------------------------------------------------------------------------
PROFUND VP U.S. GOVERNMENT PLUS
01/01/2002 to 12/31/2002 -- $11.64 206,704
01/01/2003 to 12/31/2003 $11.64 $11.27 186,404
01/01/2004 to 12/31/2004 $11.27 $12.11 195,171
01/01/2005 to 12/31/2005 $12.11 $13.11 493,711
01/01/2006 to 12/31/2006 $13.11 $12.44 112,791
01/01/2007 to 12/31/2007 $12.44 $13.61 339,646
01/01/2008 to 12/31/2008 $13.61 $20.24 201,150
01/01/2009 to 12/31/2009 $20.24 $13.55 138,066
01/01/2010 to 12/31/2010 $13.55 $14.82 92,703
01/01/2011 to 12/31/2011 $14.82 $21.13 99,876
A-22
Number of
Accumulation Accumulation Accumulation
Unit Value at Unit Value at Units Outstanding at
Sub-Accounts Beginning of Period End of Period End of Period
---------------------------------------------------------------------------------------
PROFUND VP ULTRABULL
01/01/2002 to 12/31/2002 $7.52 $4.78 108,279
01/01/2003 to 12/31/2003 $4.78 $7.26 327,838
01/01/2004 to 12/31/2004 $7.26 $8.45 367,865
01/01/2005 to 12/31/2005 $8.45 $8.61 133,241
01/01/2006 to 12/31/2006 $8.61 $10.53 137,577
01/01/2007 to 12/31/2007 $10.53 $10.55 268,096
01/01/2008 to 12/31/2008 $10.55 $3.42 634,913
01/01/2009 to 12/31/2009 $3.42 $4.91 139,898
01/01/2010 to 12/31/2010 $4.91 $5.96 55,751
01/01/2011 to 12/31/2011 $5.96 $5.63 270,540
---------------------------------------------------------------------------------------
PROFUND VP ULTRAMID-CAP
01/01/2002 to 12/31/2002 -- $5.75 34,937
01/01/2003 to 12/31/2003 $5.75 $9.71 91,098
01/01/2004 to 12/31/2004 $9.71 $12.32 245,338
01/01/2005 to 12/31/2005 $12.32 $14.43 77,439
01/01/2006 to 12/31/2006 $14.43 $15.87 61,966
01/01/2007 to 12/31/2007 $15.87 $16.70 40,495
01/01/2008 to 12/31/2008 $16.70 $5.40 30,204
01/01/2009 to 12/31/2009 $5.40 $8.89 77,657
01/01/2010 to 12/31/2010 $8.89 $13.22 71,553
01/01/2011 to 12/31/2011 $13.22 $11.34 47,030
---------------------------------------------------------------------------------------
PROFUND VP ULTRANASDAQ-100
01/01/2002 to 12/31/2002 $1.94 $0.60 1,188,414
01/01/2003 to 12/31/2003 $0.60 $1.21 1,640,765
01/01/2004 to 12/31/2004 $1.21 $1.37 1,534,878
01/01/2005 to 12/31/2005 $1.37 $1.31 1,633,641
01/01/2006 to 12/31/2006 $1.31 $1.36 1,830,505
01/01/2007 to 12/31/2007 $1.36 $1.74 2,571,465
01/01/2008 to 12/31/2008 $1.74 $0.47 2,361,022
01/01/2009 to 12/31/2009 $0.47 $1.03 1,560,904
01/01/2010 to 12/31/2010 $1.03 $1.38 1,434,255
01/01/2011 to 12/31/2011 $1.38 $1.35 544,887
---------------------------------------------------------------------------------------
PROFUND VP ULTRASMALL-CAP
01/01/2002 to 12/31/2002 $8.51 $4.85 147,185
01/01/2003 to 12/31/2003 $4.85 $9.61 258,143
01/01/2004 to 12/31/2004 $9.61 $12.51 476,709
01/01/2005 to 12/31/2005 $12.51 $12.41 68,999
01/01/2006 to 12/31/2006 $12.41 $15.53 77,538
01/01/2007 to 12/31/2007 $15.53 $13.40 63,150
01/01/2008 to 12/31/2008 $13.40 $4.50 95,466
01/01/2009 to 12/31/2009 $4.50 $6.27 126,689
01/01/2010 to 12/31/2010 $6.27 $9.24 126,225
01/01/2011 to 12/31/2011 $9.24 $7.45 74,940
A-23
Number of
Accumulation Accumulation Accumulation
Unit Value at Unit Value at Units Outstanding at
Sub-Accounts Beginning of Period End of Period End of Period
----------------------------------------------------------------------------------------------------
PROFUND VP UTILITIES
01/01/2002 to 12/31/2002 $8.18 $6.18 127,336
01/01/2003 to 12/31/2003 $6.18 $7.45 88,248
01/01/2004 to 12/31/2004 $7.45 $8.97 347,666
01/01/2005 to 12/31/2005 $8.97 $10.07 171,380
01/01/2006 to 12/31/2006 $10.07 $11.93 337,008
01/01/2007 to 12/31/2007 $11.93 $13.72 337,671
01/01/2008 to 12/31/2008 $13.72 $9.45 124,740
01/01/2009 to 12/31/2009 $9.45 $10.39 50,448
01/01/2010 to 12/31/2010 $10.39 $10.94 85,330
01/01/2011 to 12/31/2011 $10.94 $12.77 80,910
----------------------------------------------------------------------------------------------------
PRUDENTIAL SP INTERNATIONAL GROWTH PORTFOLIO
01/01/2004 to 12/31/2004 -- $10.53 14,108
01/01/2005 to 12/31/2005 $10.53 $12.18 49,783
01/01/2006 to 12/31/2006 $12.18 $14.65 54,533
01/01/2007 to 12/31/2007 $14.65 $17.40 70,733
01/01/2008 to 12/31/2008 $17.40 $8.59 36,984
01/01/2009 to 12/31/2009 $8.59 $11.71 31,437
01/01/2010 to 12/31/2010 $11.71 $13.26 26,798
01/01/2011 to 12/31/2011 $13.26 $11.21 44,419
----------------------------------------------------------------------------------------------------
RYDEX VT INVERSE S&P 500 STRATEGY
01/01/2002 to 12/31/2002 $12.29 $14.85 875
01/01/2003 to 12/31/2003 $14.85 -- 0
01/01/2005 to 12/31/2005 $10.05 $9.91 0
01/01/2006 to 12/31/2006 $9.91 $9.11 0
01/01/2007 to 12/31/2007 $9.11 $9.12 0
01/01/2008 to 12/31/2008 $9.12 $12.62 0
01/01/2009 to 12/31/2009 $12.62 $9.08 0
01/01/2010 to 12/31/2010 $9.08 $7.49 0
01/01/2011 to 12/31/2011 $7.49 $6.77 0
----------------------------------------------------------------------------------------------------
RYDEX VT NASDAQ-100
01/01/2002 to 12/31/2002 $6.78 $4.12 105,261
01/01/2003 to 12/31/2003 $4.12 $5.95 92,804
01/01/2004 to 12/31/2004 $5.95 $6.47 78,958
01/01/2005 to 12/31/2005 $6.47 $6.50 50,445
01/01/2006 to 12/31/2006 $6.50 $6.83 36,153
01/01/2007 to 12/31/2007 $6.83 $7.99 19,450
01/01/2008 to 12/31/2008 $7.99 $4.61 17,452
01/01/2009 to 12/31/2009 $4.61 $6.97 14,083
01/01/2010 to 12/31/2010 $6.97 $8.20 8,490
01/01/2011 to 12/31/2011 $8.20 $8.32 8,502
----------------------------------------------------------------------------------------------------
RYDEX VT NOVA
01/01/2002 to 12/31/2002 $6.54 $4.18 53,740
01/01/2003 to 12/31/2003 $4.18 $5.77 50,893
01/01/2004 to 12/31/2004 $5.77 $6.58 48,943
01/01/2005 to 12/31/2005 $6.58 $6.79 47,099
01/01/2006 to 12/31/2006 $6.79 $8.05 31,057
01/01/2007 to 12/31/2007 $8.05 $8.09 19,304
01/01/2008 to 12/31/2008 $8.09 $3.66 17,442
01/01/2009 to 12/31/2009 $3.66 $4.92 17,400
01/01/2010 to 12/31/2010 $4.92 $5.87 17,364
01/01/2011 to 12/31/2011 $5.87 $5.76 17,338
A-24
Number of
Accumulation Accumulation Accumulation
Unit Value at Unit Value at Units Outstanding at
Sub-Accounts Beginning of Period End of Period End of Period